Publication Type

Journal Article

Version

acceptedVersion

Publication Date

8-2020

Abstract

This paper provides early but broad empirical evidence on MiFID II, which requires investment firms to unbundle investment research from other costs they charge to clients. Employing difference-in-differences matched-sample research designs with firm fixed effects, we find a decrease in the number of sell-side analysts covering European firms after MiFID II implementation, particularly for firms that are less important to the sell-side. However, research quality improves; specifically, individual analyst forecasts are more accurate and stock recommendations garner greater market reactions. In addition, sell-side analysts seem to cater more to the buy-side after MiFID II by providing industry recommendations along with stock recommendations. Importantly, we predict and find evidence that buy-side investment firms turn to more inhouse research after MiFID II implementation. Equally interesting, buy-side analysts increase their participation and engagement in earnings conference calls, compared to the control group. We find some evidence that stock-market liquidity decreases post MiFID II.

Keywords

MiFID II, Financial services, Sell-side analysts, Buy-side research, Unbundling, Hard dollar, Europe

Discipline

Accounting | Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Corporate Reporting and Disclosure

Publication

Review of Accounting Studies

Volume

25

Issue

3

First Page

855

Last Page

902

ISSN

1380-6653

Identifier

10.1007/s11142-020-09545-w

Publisher

Springer Verlag (Germany)

Additional URL

https://doi.org/10.1007/s11142-020-09545-w

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