Jonathan B. Cohn

Do Stock Analysts Influence Merger Completion? An Examination of Postmerger Announcement Recommendations

This paper investigates the effects of analyst recommendations issued after a merger announcement on deal completion. We find the probability of completion increases decreases with the favorability of acquirer target recommendations. Results from instrumental variables tests support causality running from recommendations to merger outcomes. Additional tests suggest that these relations are driven by target shareholders reassessing the merger offer in response to movements in acquirer and target valuations. We also find that favorably recommended firms in a proposed merger underperform following deal resolution, suggesting that investors overreact to postmerger announcement recommendations. This paper was accepted by Wei Jiang, finance.

Credit Ratings: Strategic Issuer Disclosure and Optimal Screening

We study a model in which an issuer can manipulate information obtained by a credit rating agency (CRA) seeking to screen and rate its financial claim. Better CRA screening leads to a lower probability of obtaining a high rating but makes a high rating more valuable. Over an intermediate range of manipulation cost, improving screening quality can lead to more manipulation, dampening the CRAs incentive to screen. We further show that a CRAs own incentives to inflate ratings constrain its optimal screening intensity. Our model suggests that strategic disclosure by issuers may have played a role in recent ratings failures.

The Motives for Private Equity Buyouts of Private Firms: Evidence from U.S. Corporate Tax Returns

This paper uses corporate tax return data to study the motives for private equity (PE) buyouts of U.S. private firms between 1995 and 2009. In contrast with prior evidence that PE acquirers target public firms facing overinvestment problems, we find that PE acquirers target private firms facing underinvestment problems due to financing constraints. These firms tend to grow substantially post-buyout. We also find some evidence that PE buyers target industry laggards as well, and engineer operational turnarounds in these firms.

How Do Employees Fare in Private Equity Buyouts? Evidence from Workplace Safety Records

This paper presents evidence that workplace injury rates decline substantially after private equity buyouts. The decline holds for buyouts of public firms but not private firms, and is greater for public firms likely facing more pressure pre-buyout to deliver short-term performance, suggesting that alleviating pressure on managers to make short-sighted decisions can improve workplace safety. There is some evidence that high levels of buyout debt lessen the decline in injury rate. Finally, employment after buyouts declines more at relatively safe establishments, though this effect is small relative to the injury rate decline within establishments.

Private Equity Buyouts and Workplace Safety

This paper presents evidence that workplace injury rates decline substantially after private equity buyouts. The decline holds for buyouts of public firms but not private firms, and is greater for public firms likely facing more pressure pre-buyout to deliver short-term performance, suggesting that alleviating pressure on managers to make short-sighted decisions can improve workplace safety. There is some evidence that high levels of buyout debt lessen the decline in injury rate. Finally, employment after buyouts declines more at relatively safe establishments, though this effect is small relative to the injury rate decline within establishments.

How Do Employees Fare in Leveraged Buyouts? Evidence from Workplace Safety Records

This paper presents evidence that workplace injury rates decline substantially after private equity buyouts. The decline holds for buyouts of public firms but not private firms, and is greater for public firms likely facing more pressure pre-buyout to deliver short-term performance, suggesting that alleviating pressure on managers to make short-sighted decisions can improve workplace safety. There is some evidence that high levels of buyout debt lessen the decline in injury rate. Finally, employment after buyouts declines more at relatively safe establishments, though this effect is small relative to the injury rate decline within establishments.

How Much Do Analysts Influence Each Other's Forecasts?

This paper develops and applies a new approach for disentangling the influence of analysts on each others earnings forecasts from the effects of correlated information shocks. We estimate that, on average, each cent a new forecast by an analyst is above (below) another analysts most recent forecast causes the other analyst to revise her forecast upwards (downwards) by between 0.21 and 0.36 cents. More reputable analysts are more influential, while those that tend to be optimistic are less influential and are influenced more by the forecasts of other analysts. We do not find support for career concerns-driven herding or anti-herding. Finally, we find that more influential analysts are more likely to subsequently be ranked as All-Stars and to move from a less to a more prestigious brokerage house, and less likely to leave the analyst profession, suggesting that influence is a desirable characteristic.