Optimism bias in financial analysts' earnings forecasts: Do commissions sharing agreements reduce conflicts of interest?

Sébastien Galanti and Anne-Gaël Vaubourg ()
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Anne-Gaël Vaubourg: CRIEF [Poitiers] - Centre de recherche sur l'intégration économique et financière - UP - Université de Poitiers = University of Poitiers

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Abstract: Implemented in May 2007, the French rules governing commission-sharing agreements (CSAs) consist of unbundling brokerage and investment research fees. The goal of this paper is to analyze the effect of these rules on analysts' forecasts. Based on a sample of one-year-ahead earnings per share forecasts for 58 French firms during the period from 1999 to 2011, we conduct panel data regressions. We show that the analysts' optimistic bias declined significantly after CSA rules, which suggests that these rules are effective at curbing the conflicts of interest between brokerage activities and financial research. Our results are robust tothe impact of the Global Settlement and the Market Abuse Directive.

Keywords: Financial Analysts; Stock Market; Recommendations (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

Published in Economic Modelling, 2017, 67, pp.325-337. ⟨10.1016/j.econmod.2017.02.001⟩

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Journal Article: Optimism bias in financial analysts' earnings forecasts: Do commissions sharing agreements reduce conflicts of interest? (2017)
Working Paper: Optimism bias in financial analysts' earnings forecasts: Do commissions sharing agreements reduce conflicts of interest? (2017)
Working Paper: Optimism bias in financial analysts' earnings forecasts: Do commissions sharing agreements reduce conflicts of interest? (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01724257

DOI: 10.1016/j.econmod.2017.02.001

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