Doctor of Philosophy (PhD)


Finance (Business Administration)

Document Type



This dissertation examines the interactions of corporate governance on analyst behavior. Analyst bias is well documented in the previous literature. However, the relationship between managerial entrenchment and analyst bias has not been explored. In my first essay, I hypothesize that while analysts strike a balance between personal reputation and revenue generation for their employers, entrenched managers of covered firms are more likely to induce analysts’ collaboration using management access and underwriting businesses. My hypothesis suggests that managerial entrenchment is a potential source of analyst bias. Consistent with my hypothesis, using the G-Index as a proxy for managerial entrenchment, I show that analysts provide more upward biased recommendations as managerial entrenchment becomes worse. Interestingly, I find that affiliated analyst bias is present only for medium level entrenchment sample where G-Index is between 6 and 13. Furthermore, my results show that recent regulations are very effective to alleviate conflict of interest since regulations emphasize the importance of reputation and eliminate the tools managers use to induce analysts to bias their research. In my second essay, I hypothesize that it is more difficult for firms that grant investors weak shareholder rights to raise equity, and that since any difficulty in firm commitment offerings transferred to underwriters, they would ask for higher underwriting spreads to compensate for the difficulty and put more efforts to promote SEOs. Consistent with this hypothesis, I find that analyst recommendations on firms with weak shareholders rights increase sharply, starting one year prior to SEOs, and their recommendations reverse back two months after the SEOs. Issuing firms that grant investors strong shareholder rights do not experience such an increase and then a decrease in analyst recommendations surrounding their SEOs. Furthermore, I find that underwriting spreads are positively related to analyst recommendations and inversely related to shareholder rights. My findings suggest that firms with weak shareholders rights have to pay underwriters more to raise capital and thus suffer financially. Overall, my results improve our understanding of interactions between corporate governance and analyst behavior, and highlight the importance of corporate governance in corporate financing.



Document Availability at the Time of Submission

Release the entire work immediately for access worldwide.

Committee Chair

Lin, Ji-Chai