Analyst Coverage of Private Firms

Abstract

This study examines how the information provided to equity market participants shapes the information role of debt analysts in public debt markets. The corporate bond market is comprised of companies with publicly-traded equity (“public firms”) and privately-held equity (“private firms”). I exploit this distinction between private and public companies to measure variation in the amount of information produced for public equity holders. I find that debt analysts are less likely to cover private firms. Conditional on coverage, however, the frequency, length, and forward-looking content in debt analyst reports is similar across public and private firms. Further, the lack of equity market information signals increases debt analysts’ reliance on mandatory SEC filings and amplifies the bond market reaction to debt reports for private firms. Collectively, my findings shed light on the interactions between information intermediaries and other economic agents in capital markets, and how these interactions affect the corporate information environment.