Conflicts of Interest and Stock Recommendations: The Effects of the Global Settlement and Related Regulations
By Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach. 2009
364 citations recorded by the source corpus.
We study the effect of the Global Analyst Research Settlement and related regulations on sell-side research. These regulations attempted to mitigate the interdependence between research and investment banking. We document that following the regulations many brokerage houses have migrated from the traditional five-tier rating system to a three-tier system. Optimistic recommendations have become less frequent and more informative, whereas neutral and pessimistic recommendations have become more frequent and less informative. Importantly, the overall informativeness of recommendations has declined. The likelihood of issuing optimistic recommendations no longer depends on affiliation with the covered firm, although affiliated analysts are still reluctant to issue pessimistic recommendations. The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.
Subfields: Accounting, Finance
View Paper: https://www.semanticscholar.org/paper/b178704ffb9810a085d2515470b12a5ccd5dd687
Citations in the corpus
- Customer Satisfaction, Analyst Stock Recommendations, and Firm Value (2010, neutral): “Kadan et al. 2009 !”
- Does the Scope of the Sell-Side Analyst Industry Matter? An Examination of Bias, Accuracy, and Information Content of Analyst Reports: Does the Scope of the Sell-Side Analyst Industry Matter? (2017, neutral): “Prior research suggests that the Global Industry Classification Standard (GICS) provides the most accurate representation of how many brokerage houses organize their analyst teams (Bhojraj, Lee, and Oler (2003), Boni and Womack (2006), Kadan et al. (2012)).”
- Measure for Measure: The Relation between Forecast Accuracy and Recommendation Profitability of Analysts (2007, neutral): “, see Lin and McNichols (1998), Michaely and Womack (1999), Kadan et al. (2005), Malmendier and Shanthikumar (2005).”
- Persuasion: Empirical Evidence (2010, neutral): “Kadan et al. (2008) study a 2002 regulation that required brokerage houses to publicize the share of their analysts' recommendations in the sell, hold, and buy categories (NASD Rule 2711 and amended NASD Rule 472).”
- Brokerage Commissions and Institutional Trading Patterns (2009, neutral): “Recent regulatory measures appear to have reduced the profitability of premium broker services (Kadan et al. 2006).”
- Short Selling and Earnings Management: A Controlled Experiment (2016, neutral): “As Kadan et al. (2009) point out, recent equity issuance is positively correlated with the ex ante likelihood that a firm will issue equity again.”