Should information be sold separately? Evidence from MiFID II

Yifeng Guo and Lira Mota

Journal of Financial Economics, 2021, vol. 142, issue 1, 97-126

Abstract: Information production is key to the efficiency of financial markets. Does selling information separately improve its production? We investigate this question using MiFID II, a European regulation that unbundles research from transactions. We show that unbundling causes fewer research analysts to cover a firm. This decrease does not come from small- or mid-cap firms but is concentrated in large firms. Surprisingly, the reduction in analyst coverage is accompanied by a decrease in forecast error. Further analyses suggest that analyst competition enhancement could drive the results: inaccurate analysts drop out, and analysts who stay produce more accurate research.

Keywords: Analyst research; Information production; MiFID II; Unbundling (search for similar items in EconPapers)
JEL-codes: G12 G14 G18 G24 G28 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:142:y:2021:i:1:p:97-126

DOI: 10.1016/j.jfineco.2021.05.037

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