Debt Analysts' Views of Debt-Equity Conflicts of Interest

of the operating fundamentals’ strength. For example, in some cases, analysts discuss
management’s decision to continue its share repurchase program, but at a reduced repurchase
rate. As another example, repurchases are often associated with better-than-expected operating
results, providing a net positive wealth effect for debt holders.
4.2. Timing of other events relative to debt analysts’ conflict discussion
Debt analysts exercise discretion in their decision to issue reports that contain discussions
of conflict events. Table 4 presents the frequency of actual conflict events around the publication
date of debt analysts’ reports with conflict discussions. We retrieve the announcement dates of
these events from Thompson One (this dataset was formerly known as SDC Platinum). For
example, the first row shows that, for 18.2% of these reports with conflict discussions, firms
announced M&A-related activity in the period ranging from 30 to 3 trading days before the
report. Approximately 1.5% of conflict-discussion reports are contemporaneous (i.e., day -2 to
+2) with a firm’s M&A announcement. For 17.3% of these debt analyst reports with conflict
discussions, firms announced M&A-related activity in the period from 3 to 30 days after the
report. The pattern is similar to other events, suggesting that debt analysts discuss both past and
future potential events. The evidence that debt analysts anticipate, to some extent, conflict events
supports the notion that the tone of their discussion may provide relevant and timely information
to debt investors.
In addition, in untabulated analysis we examine the timing of the negative conflict event
discussion in debt analysts’ reports relative to credit rating downgrades. Because credit rating
agencies care about rating stability, they often deliver more timely information to investors by
adding firms to credit watchlists. Therefore, we also examine the timing of negative conflict
discussions relative to when a firm is added to a negative watchlist. We test for the relative
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