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

William L. Buslepp

Texas Tech University - Area of Accounting

Ryan Casey

University of Denver

George Ryan Huston

Arizona State University (ASU) - School of Accountancy

Date Written: April 16, 2014

Abstract

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

Buslepp, William L. and Casey, Ryan and Huston, George Ryan, Did They Get What They Paid For? The Global Analyst Research Settlement and Analyst Research Quality (April 16, 2014). Available at SSRN: https://ssrn.com/abstract=2139602 or http://dx.doi.org/10.2139/ssrn.2139602

William L. Buslepp (Contact Author)

Texas Tech University - Area of Accounting ( email )

P.O. Box 42101
Lubbock, TX 79409
United States

Ryan J. Casey

University of Denver ( email )

2101 South University
Boulevard, Suite 355
Denver, CO 80208-8921
United States
(303) 871-7695 (Phone)

George Ryan Huston

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

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