Events

Dr. Xinlei LI
Assistant Professor
Department of Accounting
The Hong Kong University of Science and Technology

We investigate whether firms provide preferential treatment to lender-affiliated analysts (i.e., analysts from brokerage houses affiliated with the firms’ lender) during earnings conference calls. We find robust evidence that firms exercise discretion to let lender-affiliated analysts participate earlier in earnings conference calls before loan initiation than non-lender-affiliated analysts, especially for firms with more informative conference calls. We further find that management has more positive tones and answers questions more effectively to lender-affiliated analysts. We find no evidence that these analysts’ questions are different from other analysts. In addition, we document those loans from borrowers that provide preferential treatment to lender-affiliated analysts have lower spreads, higher loan amounts and an increased probability of future relationship loans. Our results highlight an unexamined role that earnings conference calls play in the debt market to send a more credible public signal through lender-affiliated analysts to facilitate private communication and foster relationship lending.