Conflicts of Interest in Sell-Side Research and the Moderating Role of Institutional Investors

Alexander Ljungqvist (), Felicia Marston, Hong Yan, Laura T Starks and Kelsey D. Wei

No 5001, CEPR Discussion Papers from Centre for Economic Policy Research

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.

Keywords: Analyst recommendations; Analyst forecast accuracy; Investment banking; Conflicts of interest; Institutional investors; Banking relationships (search for similar items in EconPapers)
JEL-codes: G20 G21 G23 G24 (search for similar items in EconPapers)
Date: 2005-04
New Economics Papers: this item is included in nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Journal Article: Conflicts of interest in sell-side research and the moderating role of institutional investors (2007)
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