The Informational Role of Bond Analysts

Journal of Accounting Research, Forthcoming

55 Pages Posted: 20 Mar 2008 Last revised: 13 Jul 2009

See all articles by Gus De Franco

Gus De Franco

Tulane University - A.B. Freeman School of Business

Florin P. Vasvari

London Business School

Regina Wittenberg Moerman

University of Southern California

Date Written: July 5, 2009


This study uses a large sample of sell-side bond analysts’ reports to examine the properties of recommendations provided by bond analysts and the impact of these recommendations on bond securities. First, we document that the distribution of bond analysts’ buy, hold, and sell recommendations is skewed positively, but less so than the distribution of equity analysts’ recommendations. The positive skewness in bond analysts’ recommendations is greater for low than for high credit quality bonds. Second, we find that bond analysts’ reports generate bond trading and return reactions that are both economically significant and greater for low credit quality bonds. The bond market reaction is greater for bond analysts’ reports than for equity analysts’ reports. Finally, while both bond and equity analysts lead rating agency announcements, we find no evidence of a difference in timeliness between bond and equity analysts’ reports. Overall, our results are consistent with bond analysts issuing more negative reports than equity analysts and providing more information about low credit quality bonds as a result of the asymmetric demand for negative information by bond investors.

Keywords: bond analysts reports, bond analysts recommendations, bond market reactions

JEL Classification: G29, G33, G12

Suggested Citation

De Franco, Gus and Vasvari, Florin P. and Wittenberg Moerman, Regina, The Informational Role of Bond Analysts (July 5, 2009). Journal of Accounting Research, Forthcoming, Available at SSRN:

Gus De Franco

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Florin P. Vasvari (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Regina Wittenberg Moerman

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

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