Did They Get What They Paid For? The Global Analyst Research Settlement and Analyst Research Quality
46 Pages Posted: 1 Sep 2012 Last revised: 23 Apr 2014
Date Written: April 16, 2014
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 future performance of recommendations and the market reaction to the recommendations. Additional tests reveal that the main reason for this lack of quality is associated with industry inexperience on the part of independent research analysts; independent analysts tend to have less industry experience, and recommendations of inexperienced analysts were generally of lower quality.
Keywords: Sell-side analysts, Independent research, Global Settlement, Recommendations, Valuation estimates, Valuation heuristics
JEL Classification: G24
Suggested Citation: Suggested Citation