Is your investment bank having conflicts of interest?

Oya Altınkılıç (Robert H. Smith College of Business, University of Maryland), Vadim S. Balashov (Rutgers School of Business) and Robert S. Hansen (A.B. Freeman School of Business) investigate investment banks’ influence concerning the agreement between their research analysts’ behavior and their clients’ interests in the post-reform era (reforms incl. Reg. FD, 2000 and SOX, 2002) in the United States. Banks with meaningful monitoring seem to discipline their analysts with worse career outcomes for writing biased reports, for issuing shirking reports and for being involved in earnings guidance games. The higher the reputation of a bank the more monitoring is provided to discipline their analysts. The research suggests that it is important for banks to align analysts’ behavior with their clients’ interests.

Read full paper “Investment bank monitoring and bonding of security analysts’ research” by Oya Altınkılıç, Vadim S. Balashov and Robert S. Hansen, Journal of Accounting and Economics (Volume 67, Issue 1, February 2019, Pages 98-119) at ScienceDirect .

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