The Effectiveness of reputation as a disciplinary mechanism in sell-side research
Author: Fang, Lily Hua ; Yasuda, AyakoINSEAD Area: FinanceIn: Review of Financial Studies, vol. 22, no. 9, September 2009 Language: EnglishDescription: p. 3735-3777.Type of document: INSEAD ArticleNote: Please ask us for this itemAbstract: We examine whether the quality differentials in earnings forecasts between reputable and nonreputable analysts vary with the severity of conflicts of interest. We measure personal reputation using the Institutional Investor All-American (AA) awards, and bank reputation using Carter-Manaster ranks. While both personal and bank reputation are associated with higher quality forecasts overall, their effectiveness against conflicts of interest differs. The severity of conflicts has a negative and significant effect on the performance of non-AAs at top-tier banks relative to other analysts, while it has a positive and significant effect on the performance of AAs at top-tier banks relative to others. Thus personal reputation is an effective disciplinary device against conflicts of interest, while bank reputation alone is not| Item type | Current location | Call number | Status | Date due | Barcode | Item holds |
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We examine whether the quality differentials in earnings forecasts between reputable and nonreputable analysts vary with the severity of conflicts of interest. We measure personal reputation using the Institutional Investor All-American (AA) awards, and bank reputation using Carter-Manaster ranks. While both personal and bank reputation are associated with higher quality forecasts overall, their effectiveness against conflicts of interest differs. The severity of conflicts has a negative and significant effect on the performance of non-AAs at top-tier banks relative to other analysts, while it has a positive and significant effect on the performance of AAs at top-tier banks relative to others. Thus personal reputation is an effective disciplinary device against conflicts of interest, while bank reputation alone is not
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