Abstract
This paper studies whether independent research analysts issue more informative stock recommendation revisions than non-independent analysts. I find independent analyst recommendation upgrades and downgrades significantly less informative. I also investigate whether the identified differences in informativeness are the result of systematic cross-sectional variation in analyst ability, portfolio complexity, and brokerage firm resources. Including these variables reduces the disparity in information content between groups. However, independent revisions continue to have lower informativeness. Finally, I examine market reactions before and after the Global Settlement Agreement that was enacted to limit the perceived conflicts in the industry. Non-independent upgrades generate a 19.7% greater reaction in the post-regulation period suggesting the Global Settlement helped mitigate biased research. Independent analysts continue to issue less informative recommendations.
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