Brokerage relationships and analyst forecasts: evidence from the protocol for broker recruiting

• 成果类型: Article
• 署名作者: Coleman, Braiden; Drake, Michael; Pacelli, Joseph; Twedt, Brady
• 署名单位: University System of Georgia; University of Georgia; Brigham Young University; Harvard University; University of Oregon
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-022-09682-4
• 发表日期: 2023
• 页码: 2075-2103
• 关键词: CONFLICTS-OF-INTEREST; GLOBAL SETTLEMENT; determinants; reputation

摘要

We offer novel evidence on how the nature of brokerage-client relationships can influence the quality of equity research. We exploit a unique setting provided by the Protocol for Broker Recruiting to examine whether relaxed broker noncompete agreement enforcement generates spillover effects on sell-side analysts. Entry into this agreement reassigns ownership of the client relationship from the brokerage to individual brokers, potentially generating a greater standard of care. Using a generalized difference-in-differences research design, we provide evidence consistent with brokers reducing pressure on analysts to produce optimistic research following protocol entry. This effect is concentrated among less experienced and non-All Star analysts, who previously may have faced the greatest pressures to sacrifice objectivity. Additionally, we find that analysts issue more accurate forecasts and generate reports with heightened market reactions following protocol entry. Our collective evidence sheds new light on how the nature of brokerage relationships can influence analysts' research production.