Did They Get What They Paid For? The Global Analyst Research Settlement and Analyst Research Quality
William L. Buslepp
Texas Tech University - Area of Accounting
University of Illinois at Chicago
George Ryan Huston
University of South Florida - School of Accountancy; Florida State University - Department of Accounting
August 31, 2012
We examine the impact of a specific facet of the Global Research Analyst Settlement (Global Settlement) - the $460 million spent to procure independent analyst research. We compare independent research funded by the Global Settlement to that of the sanctioned investment banks as well as that of independent research firms not receiving such funding. Our results suggest that funded research is of lower quality than that of the sanctioned banks and non-funded independent research based on three separate measures of research quality: future performance of recommendations, the consistency between recommendations and intrinsic value, and the market reaction to the recommendations. Additionally, the results suggest two reasons for the failure of the independent research provider program: the research firms chosen to participate in the program were of lower quality and there was a lack of incentives for quality research. Overall, we find that the provision relating to funded independent research did not meet its stated intentions.
Number of Pages in PDF File: 47
Keywords: Sell-side analysts, Independent research, Global Settlement, Recommendations, Valuation estimates, Valuation heuristics
JEL Classification: G24working papers series
Date posted: September 1, 2012 ; Last revised: August 31, 2013
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