Conflicts of Interest in Sell-Side Research and the Moderating Role of Institutional Investors
50 Pages Posted: 22 Aug 2005
There are 4 versions of this paper
Conflicts of Interest in Sell-Side Research and the Moderating Role of Institutional Investors
Conflicts of Interest in Sell-Side Research and the Moderating Role of Institutional Investors
Conflicts of Interest in Sell-Side Research and the Moderating Role of Institutional Investors
Date Written: April 2005
Abstract
Because sell-side analysts are dependent on institutional investors for performance ratings and trading commissions, we argue that analysts are less likely to succumb to investment banking or brokerage pressure in stocks highly visible to institutional investors. Examining a comprehensive sample of analyst recommendations over the 1994-2000 period, we find that analysts' recommendations relative to consensus are positively associated with investment banking relationships and brokerage pressure, but negatively associated with the presence of institutional investor owners. The presence of institutional investors is also associated with more accurate earnings forecasts and more timely re-ratings following severe share price falls.
Keywords: Analyst recommendations, analyst forecast accuracy, investment banking, conflicts of interest, institutional investors, banking relationships
JEL Classification: G20, G21, G23, G24
Suggested Citation: Suggested Citation
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