Lender‐Affiliated Analysts and Syndicated Loans

ABSTRACT Loans to borrowers covered by affiliated analysts have lower spreads. This effect is driven mostly by affiliated analysts sharing information with, rather than demanding information from, lending arms. Exploiting plausibly exogenous changes in brokerage affiliations, we find that the results are likely to be causal. Affiliated analysts' private information and industry knowledge contribute to these spread reductions. Lenders are less likely to request projected financial information and to require financial information more frequently than quarterly via affirmative covenants, suggesting that information from affiliated analysts substitutes for costly borrower disclosure. Affiliated analyst coverage is associated with more financial covenants, consistent with affiliated analysts facilitating effective post‐origination monitoring. These results highlight a novel role that analysts play in the debt market.