Publication Type

Journal Article

Version

Preprint

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

Additional URL

http://dx.doi.org/10.1093/rfs/hhn109

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