The Activities of Buy-Side Analysts and the Determinants of Their Stock Recommendations

We survey 344 buy-side analysts from 181 investment firms and conduct 16 detailed follow-up interviews to gain insights into the activities of buy-side analysts, including the determinants of their compensation, the inputs to their stock recommendations, their beliefs about financial reporting quality, and the role of sell-side analysts in buy-side research. One important finding is that 10-K or 10-Q reports are more useful than quarterly conference calls and management earnings guidance for determining buy-side analysts’ stock recommendations. Our results also suggest that sell-side analysts add value by providing buy-side analysts with in-depth industry knowledge and access to company management.

Keywords: Buy-Side Analysts, Stock Recommendations, Compensation, Sell-Side Analysts, Private Communication, Industry Knowledge

JEL Classification: G10, G11, G23, M40

Suggested Citation: Suggested Citation

Brown, Lawrence D. and Call, Andrew C. and Clement, Michael B. and Sharp, Nathan Y., The Activities of Buy-Side Analysts and the Determinants of Their Stock Recommendations (July 2016). Journal of Accounting & Economics (JAE), Forthcoming; Mays Business School Research Paper No. 2808634. Available at SSRN: https://ssrn.com/abstract=2808634