Details

Autor(en) / Beteiligte

• Galanti, Sébastien

Titel

Which Side Are You On? How Institutional Positions Affect Financial Analysts' Incentives

Ist Teil von

• Journal of economic issues, 2006-06, Vol.40 (2), p.387-394

Ort / Verlag

Lincoln: Routledge

Erscheinungsjahr

2006

Link zum Volltext

Quelle

EBSCOhost Business Source Ultimate

Beschreibungen/Notizen

• Recent scandals involving financial analysts shed light on conflicts of interest in the stock market. Financial analysts were accused of releasing dishonest "buy" recommendations for stocks and biased earnings forecasts. Interestingly, the problem has, in most cases, been treated as an individual matter, as if it only concerned deviant behaviors by certain individuals. It is frequently asserted that analysts sometimes give untruthful forecasts due to career considerations. The theoretical source of such statements lies in reputation-based "herding models". Analysts with better reputations are more likely to issue accurate forecasts; hence this provides an incentive for other analysts to "herd." The institutional incentives of buy-side analysts are obviously aligned to those of the portfolio manager of their organization: their forecasts are required to be accurate. But such an obligation does not mean that this is systematically the case; if this were so, there would be no reason to listen to sell-side analysts.