Abstract
This study tests the hypothesis that new regulatory restrictions on cooperation between analysts and investment bankers associated with the 2003 Global Settlement have an adverse effect on analyst coverage. Policy makers have expressed concern about this matter. Contrary to the hypothesis, I find that firms engaging in SEO’s enjoy just as large an increase in analyst coverage in the post-regulatory period as they do in the preregulatory period. In addition, while I find that analyst coverage in the post regulatory period significantly declines for new IPO’s, it declines by an equal amount for a matched sample of control firms that generate no significant investment banking business. Making the identifying assumption that any adverse consequences of the new restrictions should be larger for new IPO’s, I conclude that the restrictions have no detectable impact on analyst coverage.
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