Abstract
Sell-side analysts commonly transition to buy-side money managers. I examine whether these career transitions compromise sell-side research, relying on granular career information of 6,310 analysts. I find that these analysts issue recommendations that favor their future buy-side employers during the year immediately before the transition. This favoritism is more pronounced among stocks where a single analyst is more impactful and is present only among transitions likely to be strategically planned. Additional analyses using target price forecasts reveal that these optimistic forecasts are less accurate. The findings suggest that these career transitions are a new source of conflicts of interest.
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