Is Sell-Side Research Being Napsterized? Intellectual Property and the Sell-Side Industry

43 Pages Posted: 9 Dec 2016 Last revised: 9 Feb 2018

See all articles by Daniel Bradley

Daniel Bradley

University of South Florida

Jonathan Clarke

Georgia Institute of Technology - Scheller College of Business

Linghang Zeng

Georgia Institute of Technology - Scheller College of Business

Date Written: February 6, 2017

Abstract

Between 2009 and 2013, Theflyonthewall.com (FLY) leaks 58% of recommendation revisions, often before the market open and before I/B/E/S time stamps. We show FLY improves price discovery, but leaked recommendations hamper the ability of brokers to offer price improvement on trades routed through them. Three large brokers sued FLY and ultimately lost, upon which the average broker experienced -1.3% abnormal announcement returns. Consequently, brokers trim their analyst workforce and number of stocks covered. Overall, this disruption has negatively impacted the incentives to produce information leading to a further decline in the scope of the sell-side research industry.

Keywords: Value of analyst research, analysts' recommendations, Theflyonthewall.com, sell-side research

JEL Classification: G20, G23

Suggested Citation

Bradley, Daniel and Clarke, Jonathan and Zeng, Linghang, Is Sell-Side Research Being Napsterized? Intellectual Property and the Sell-Side Industry (February 6, 2017). Georgia Tech Scheller College of Business Research Paper No. 17-2. Available at SSRN: https://ssrn.com/abstract=2882264 or http://dx.doi.org/10.2139/ssrn.2882264

Daniel Bradley (Contact Author)

University of South Florida ( email )

Tampa, FL 33620
United States

Jonathan Clarke

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-4929 (Phone)
404-894-6030 (Fax)

HOME PAGE: http://mgt.gatech.edu/directory/clarke.html

Linghang Zeng

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

HOME PAGE: http://sites.google.com/view/linghang-zeng

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