Publication Type
Journal Article
Version
submittedVersion
Publication Date
10-2009
Abstract
We study the effect of the Global Analyst Research Settlement and related regulations on sell-side research. These regulations attempted to mitigate the interdependence between research and investment banking. We document that following the regulations many brokerage houses have migrated from the traditional five-tier rating system to a three-tier system. Optimistic recommendations have become less frequent and more informative, whereas neutral and pessimistic recommendations have become more frequent and less informative. Importantly, the overall informativeness of recommendations has declined. The likelihood of issuing optimistic recommendations no longer depends on affiliation with the covered firm, although affiliated analysts are still reluctant to issue pessimistic recommendations.
Keywords
analysts’ reports, stock recommendations, regulations
Discipline
Corporate Finance | Portfolio and Security Analysis
Research Areas
Finance
Publication
Review of Financial Studies
Volume
22
Issue
10
First Page
4189
Last Page
4217
ISSN
0893-9454
Identifier
10.1093/rfs/hhn109
Publisher
Oxford University Press
Citation
KADAN, Ohad; MADURERIA, Leonardo; WANG, Rong; and ZACH, Tzachi.
Conflicts of Interest and Stock Recommendations: The Effects of the Global Settlement and Related Regulations. (2009). Review of Financial Studies. 22, (10), 4189-4217.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/781
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1093/rfs/hhn109