Abstract
Prior research has investigated sell-side analysts' incentives by examining the relation between analyst performance measures and either star analyst ratings or analyst turnover. Using propriety data from a large financial institution, we complement these studies by investigating factors that are associated with analysts' direct compensation. We find that total compensation is positively related to ranking among the top analysts in an industry by Institutional Investor, covering a stock that generates investment banking business for the firm, and covering stocks with large trading volume. We find no evidence that earnings forecast accuracy and stock recommendation performance are directly related to analysts' compensation. To assess the generality of our findings, we test the same relations using compensation data from a second large financial institution and find similar evidence.
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