Research for sale: Determinants and consequences of paid-for analyst research

Marcus Kirk

Journal of Financial Economics, 2011, vol. 100, issue 1, 182-200

Abstract: I examine the determinants and market impact of paid-for coverage using a hand-collected sample of paid-for reports over 1999-2006. More than five hundred publicly listed US companies paid for analyst coverage since 1999. Yet little is known about the informational consequences of this analyst research. Firms with greater uncertainty, weaker information environments, and low turnover are more likely to buy coverage as they have the most to gain from analyst coverage but are unlikely to attract sell-side analysts. Despite the inherent conflicts of interest, I find paid-for reports have information content for investors based on 2-day abnormal returns. After the initiation of coverage, companies experience an increase in institutional ownership, sell-side analyst following, and liquidity. In addition, the results are strongest for the fee-based research firm with ex ante policies that reduce potential conflicts of interest.

Keywords: Analyst; coverage; Voluntary; disclosure; Capital; markets (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304-405X(10)00276-X
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:jfinec:v:100:y:2011:i:1:p:182-200

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().