Joseph Pacelli

Credit and Punishment: The Career Incentives of Wall Street Bankers

This study examines the role of career incentives and risk management in the privately placed debt market. In particular, we examine the career path of corporate bankers underwriting syndicated loans. We construct a comprehensive dataset containing the identities and employment histories of nearly 1,500 loan officers employed in approximately 100 major U.S. corporate banking departments from the period spanning 1994 to 2012. Our findings indicate that a negative credit shock from their borrower base increases the relative likelihood that a loan officer departs the firm by roughly 50%. Furthermore, these officers experience worse career outcomes and lower promotion rates upon departure. Past negative credit events are also associated with stricter future loan contracts issued by affected loan officers (i.e., more covenants and greater covenant strictness).

Integrity Culture and Analyst Forecast Quality

This study examines the relation between financial institutions’ corporate culture and the quality of analysts’ research services. Using data collected from the Financial Industry Regulatory Authority, I measure the weakness of financial institutions’ corporate culture based on violations observed in securities activities unrelated to equity research. I find evidence demonstrating an association between weak corporate culture and analysts’ providing research products catered to institutional clients at the expense of individual investors. Specifically, FINRA violations are associated with both (i) less accurate forecasts and less informative reports, and (ii) higher institutional commission revenues and more broker-hosted conferences for select institutional clients.

Corporate Culture and Analyst Catering

This study examines the relation between financial institutions’ corporate culture and the quality of analysts’ research services. Using data collected from the Financial Industry Regulatory Authority, I measure the weakness of financial institutions’ corporate culture based on violations observed in securities activities unrelated to equity research. I find evidence demonstrating an association between weak corporate culture and analysts’ providing research products catered to institutional clients at the expense of individual investors. Specifically, FINRA violations are associated with both (i) less accurate forecasts and less informative reports, and (ii) higher institutional commission revenues and more broker-hosted conferences for select institutional clients.

Analyst Forecast Bundling

Changing economic conditions over the past two decades have created incentives for sell-side analysts to both provide their institutional clients tiered services and to streamline their written res...