Title

The 'Real' Value of Conflicted Analyst Coverage

Publication Date

3-18-2010

Abstract

This paper examines whether conflicted analyst research affects the firms under coverage. We develop a novel approach to identify a sample of firms whose coverage is mostly driven by analysts’ private incentives to generate investment banking revenue. We find that conflicted analyst coverage is recognized by investors and its loss has little adverse effect on information efficiency, capital investment, cost of capital, and equity issuance. Our results suggest that firms attain little benefit when offering investment banking business in exchange for analyst coverage.

Document Type

Article

Keywords

Conflicts of interest, sell-side research, Global Research Settlement, analyst coverage incentives, loss of analyst coverage, information asymmetry.

Disciplines

Finance

DOI

10.2139/ssrn.1571418

Source

SMU Cox: Finance (Topic)

Language

English

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