Should Information be Sold Separately? Evidence from MiFID II

63 Pages Posted: 17 Jun 2019 Last revised: 20 May 2020

See all articles by Yifeng Guo

Yifeng Guo

Columbia University - Columbia Business School, Finance

Lira Mota

Columbia University - Columbia Business School, Finance

Date Written: January 30, 2019

Abstract

Information production is key to the efficiency of financial markets. Does selling information separately improve its production? We investigate this question using MiFID II, a European regulation that unbundles research from transactions. We show that unbundling causes fewer research analysts to cover a firm. This decrease does not come from small- or mid-cap firms but is concentrated in large firms. Surprisingly, the reduction in the coverage quantity is accompanied by an increase in the coverage quality. Further analyses suggest that the enhancement of analyst competition could drive the results: inaccurate analysts drop out (extensive margin) and analysts who stay produce better-quality research (intensive margin). Our findings suggest that selling information separately improves information quality at the cost of reducing information quantity.

Keywords: Analyst Research, Information Production, MiFID II, Unbundling

JEL Classification: G00, G14, G28

Suggested Citation

Guo, Yifeng and Mota, Lira, Should Information be Sold Separately? Evidence from MiFID II (January 30, 2019). Available at SSRN: https://ssrn.com/abstract=3399506 or http://dx.doi.org/10.2139/ssrn.3399506

Yifeng Guo

Columbia University - Columbia Business School, Finance ( email )

NY
United States

Lira Mota (Contact Author)

Columbia University - Columbia Business School, Finance ( email )

NY
United States
10027 (Fax)

HOME PAGE: http://sites.google.com/view/liramota

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
424
Abstract Views
1,941
rank
74,750
PlumX Metrics