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.

We investigate the effects of countercyclical prudential buffers on bank risk-taking. We exploit the introduction of dynamic loan loss provisioning in Spain, mandating that banks use historical average loss rates in their estimation of loan loss provisions. We find that dynamic loan loss provisioning is associated with reductions in timely loan loss provisioning. Banks that previously recognized loan losses in a timely fashion exhibit the greatest reductions in timeliness and consequently extend loans to riskier borrowers with lower accounting quality. Our results have policy implications for the debate on the use of financial reporting requirements in mitigating capital pro-cyclicality.

We examine whether bankers face disciplining consequences for structuring poorly performing corporate loans. We construct a novel data set containing the employment histories and loan portfolios of a large sample of corporate bankers and find that corporate credit events (i.e., downgrades, defaults, bankruptcies) increase banker turnover. The effect is pronounced when bankers issue loans with loose terms or experience severe losses. Credit events prompt bankers to adopt stricter future risk management practices, such as offering restrictive covenant packages. Overall, our findings are consistent with banks disciplining employees as a means to manage their own risk exposure.

ABSTRACT This study examines whether enterprise resource planning (ERP) implementations are associated with reductions in corporate misconduct. Specifically, we study the relation between staggered facility-level rollouts of ERP systems and facility-level regulatory violations across a large sample of U.S. firms. Our results indicate that facility-level ERP adoptions are associated with substantial reductions in local violations and penalties. Additional analyses suggest that the effects are more pronounced among facilities incorporating advanced analytics into their systems and among workforces that are less resistant to technology change. Overall, our results suggest that ERP systems generate indirect effects that enhance compliance outcomes across a wide range of violations. JEL Classifications: M40, M41

We examine how cultural differences among agents influence the aggregate outcome of a common forecasting task. Using both exogenous shocks to sell-side analyst diversity and panel regression methods, we find that increases in analyst cultural diversity positively affect the quality of the consensus earnings forecast. We further provide evidence on the potential mechanisms underlying this result by showing that cultural diversity is associated with improvements in individual analyst forecasts, greater analyst conference call participation and interaction, and greater diversity in analyst education backgrounds and professional interests. Overall, our results indicate that greater cultural differences among agents producing an aggregate forecast are associated with a higher quality consensus forecast.

We investigate the extent to which loan officers generate independent, individual effects on the design and performance of syndicated loans. We construct a large database containing the identities of loan officers involved in structuring syndicated loan deals, allowing us to systematically disentangle borrower, bank, and loan officer fixed effects. We find that loan officers have significant influence on interest spreads, loan covenant design, and loan performance. Inclusion of borrower fixed effects increases our power to rule out the alternative that loan officer fixed effects reflect the matching of officerds to borrowers based on time-invariant borrower characteristics. We document heterogeneity in loan officers’ influence across loan contract terms, with loan officers exerting stronger influence over covenant package design than over interest spreads, but marginal influence on loan maturity. Lead officers have greater influence than participant officers over covenant package design and loan performance, but less robust differential influence on interest spreads.

ABSTRACT We provide the first comprehensive analysis of the properties of investment recommendations generated by “Robo-Analysts,” which are human analyst-assisted computer programs conducting automated research analysis. Our results indicate that Robo-Analyst recommendations differ from those produced by traditional “human” research analysts across several important dimensions. First, Robo-Analysts produce a more balanced distribution of buy, hold, and sell recommendations than do human analysts and are less likely to recommend “glamour” stocks and firms with prospective investment banking business. Second, automation allows Robo-Analysts to revise their recommendations more frequently than human analysts and incorporate information from complex periodic filings. Third, while Robo-Analysts' recommendations exhibit weak short-window return reactions, they have long-term investment value. Specifically, portfolios formed based on the buy recommendations of Robo-Analysts significantly outperform those of human analysts. Overall, our results suggest that automation in the sell-side research industry can benefit investors. JEL Classifications: G14; G24.