Conflicts of interest in sell-side research and the moderating role of institutional investors |
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| Authors: | Alexander Ljungqvist Felicia Marston Laura T. Starks Kelsey D. Wei Hong Yan |
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| Affiliation: | 1. Stern School of Business, New York University, New York, NY 10012, USA;2. McIntire School of Commerce, University of Virginia, Charlottesville, VA 22903, USA;3. McCombs School of Business, University of Texas at Austin, Austin, TX 78712, USA;4. School of Management, University of Texas at Dallas, Richardson, TX 75080, USA;5. Moore School of Business, University of South Carolina, Columbia, SC 29208, USA;6. CEPR, London, UK |
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| 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. |
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| Keywords: | G20 G21 G23 G24 |
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