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Investment bank monitoring and bonding of security analysts’ research

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  • Altınkılıç, Oya
  • Balashov, Vadim S.
  • Hansen, Robert S.

Abstract

We assess investment banks’ influence over the agreement between their analysts’ research behavior and their clients’ interests, in the post-reform era. Competing banks discipline their analysts with worse career outcomes for producing biased reports, issuing shirking reports, and for involvement in the earnings guidance game, showing meaningful monitoring of their analysts. Highly reputable banks provide more monitoring discipline of their analysts and bonding of their moral hazard than other banks. The findings agree with the banks taking responsibility for aligning analysts’ behavior with clients’ interests.

Suggested Citation

  • Altınkılıç, Oya & Balashov, Vadim S. & Hansen, Robert S., 2019. "Investment bank monitoring and bonding of security analysts’ research," Journal of Accounting and Economics, Elsevier, vol. 67(1), pages 98-119.
    • Handle: RePEc:eee:jaecon:v:67:y:2019:i:1:p:98-119
    DOI: 10.1016/j.jacceco.2018.08.016
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    More about this item

    Keywords

    Analysts; Analysts’ forecasts; Analysts’ recommendations; Career outcome; Earnings guidance; Financial analysts; Financial markets; Herding; Investment banking; Management forecasts; Management guidance; Market efficiency; Piggybacking; Regulatory change; Security analysts; Shirking;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G2 - Financial Economics - - Financial Institutions and Services
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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