Do independent research analysts issue more or less informative recommendation revisions?

Ryan J. Casey

Advances in accounting, 2013, vol. 29, issue 1, 36-49

Abstract: This paper studies whether independent research analysts issue more informative stock recommendation revisions than investment bank analysts. I find independent analyst recommendation upgrades and downgrades significantly less informative. I also investigate whether the identified differences in informativeness are the result of systematic cross-sectional variation in analyst ability, portfolio complexity, and brokerage firm resources. Including these variables reduces the disparity in information content between groups. However, independent revisions continue to have lower informativeness. I follow prior research and compute daily buy-and-hold abnormal returns to portfolios formed based on analyst firm type. I find that investment bank analyst portfolios generally outperform those of independent research analysts. Lastly, I examine market reactions before and after the Global Settlement Agreement that was enacted to limit the perceived conflicts in the industry. Lastly, investment bank analyst upgrades generate an 18.7% greater reaction in the post-regulation period, suggesting the Global Settlement helped mitigate biased research. Independent analysts continue to issue less informative recommendations.

Keywords: Financial analysts; Stock recommendations; Independent research firms (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0882611013000126
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:29:y:2013:i:1:p:36-49

DOI: 10.1016/j.adiac.2013.03.009

Access Statistics for this article

Advances in accounting is currently edited by Dennis Caplan

More articles in Advances in accounting from Elsevier
Bibliographic data for series maintained by Catherine Liu ().