Ohad Kadan Leonardo Madureira Rong Wang Tzachi Zach
Abstract
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.
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Article provided by Oxford University Press for Society for Financial Studies in its journal The Review of Financial Studies.
Volume (Year): 22 (2009) Issue (Month): 10 (October) Pages: 4189-4217 Download reference. The following formats are available: HTML
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