Incentives of Financial Analysts: Trading Turnover and Compensation

56 Pages Posted: 24 Aug 2016 Last revised: 9 Apr 2020

See all articles by Egle Karmaziene

Egle Karmaziene

VU University Amsterdam; Swedish House of Finance; Tinbergen Institute

Date Written: April 4, 2020


Are sell-side security analysts paid for turnover-generating research? Using hand-collected annual income data from tax records in Sweden, I show that analysts' compensations increase in the trading turnover that their recommendations generate. Analysts are paid 0.002 % of broker-trading volume, or approximately 1 % of broker's commission revenues. I find a significant broker-turnover analyst-pay relationship only in the post-global-settlement period, and the relation is strongest for investment banking clients' stocks. These findings empirically validate the previously assumed turnover-compensation link and may have policy implications related to the Markets in Financial Instruments Directive.

Keywords: compensation, analyst, stock recommendation, broker

JEL Classification: G12, G24

Suggested Citation

Karmaziene, Egle, Incentives of Financial Analysts: Trading Turnover and Compensation (April 4, 2020). Swedish House of Finance Research Paper No. 16-15, Available at SSRN: or

Egle Karmaziene (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV


Swedish House of Finance

Drottninggatan 98
Stockholm, 111 60

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA

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