Skip navigation

Conflicts of Interest in Sell-side Research and The Moderating Role of Institutional Investors

Authors: Ljungqvist, Alexander
Marston, Felicia
Starks, Laura T.
Wei, Kelsey D.
Yan, Hong
Keywords: Analyst recommendations;Analyst forecast accuracy;Investment banking;Banking Relationships
Issue Date: 18-Jan-2005
Series/Report no.: FIN-05-013
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.
Appears in Collections:Finance Working Papers

Files in This Item:
File Description SizeFormat 
FIN-05-013.pdf263.45 kBAdobe PDFView/Open

Items in FDA are protected by copyright, with all rights reserved, unless otherwise indicated.