Brokerage firms' revenue and profitability of their recommendations: before and after 1999-2002

Vivek Sharma
Authors registered in the RePEc Author Service: Vivek Singh ()

International Journal of Revenue Management, 2009, vol. 3, issue 3, 270-283

Abstract: We examine how the research departments of brokerage firms may issue biased recommendations in order to boost the revenue of the investment banking departments of the brokerage firms during 1993-2006. We find that during 1993-2006, sanctioned brokerage firms' upgrades not only underperformed the upgrades of non-sanctioned brokerage firms, but they also earned negative abnormal returns. The degree of underperformance for sanctioned brokerage firms' upgrades was at the highest during 1999-2002. More surprisingly, the underperformance of upgrades continues in 2003-2006. We also find weak evidence of underperformance of upgrades in the period of 1993-1998.

Keywords: analyst recommendations; brokerage firms; brokerage revenue; conflict of interest; global settlement; revenue management; bias; investment banking; under-performance; upgrades. (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijrevm:v:3:y:2009:i:3:p:270-283

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