Banks’ ‘Chinese Walls’ Don’t Block Information Flows, FT Says
Big banks’ equity analysts have access to inside information from corporate lending desks, despite the existence of so-called “Chinese walls” that are meant to stop price-sensitive information passing between departments, the Financial Times reported, citing a study to be published in the Journal of Accounting Research.
Ting Chen of the Zicklin School of Business and Xiumin Martin of the Olin Business School examined bank loans and analysts’ earnings-per-share estimates between 1994 and 2007 and found that the accuracy of forecasts improved significantly if banks’ commercial lending arms signed loan agreements, the newspaper said.
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