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The Real Effects of Analyst Research Quality: Evidence from the Adoption of the Broker Protocol

The Real Effects of Analyst Research Quality: Evidence from the Adoption of the Broker Protocol I provide empirical evidence that labour market frictions have an adverse effect on the quality of analyst research. Using the staggered, voluntary adoption of the Protocol for Broker Recruiting (Protocol) since 2004, I show that, without non‐compete agreements, financial analysts produce more accurate forecasts and exert greater efforts in updating their research more frequently. Consistent with the notion that information asymmetry in the capital market are lower in the post‐Protocol period, I provide empirical evidence and argue that the research coverage by Protocol members enables managers to access capital and extend their investment opportunities. My findings suggest that analyst coverage by Protocol members has a favourable effect on investment in innovative projects, production capacity and acquisitions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Australian Accounting Review Wiley

The Real Effects of Analyst Research Quality: Evidence from the Adoption of the Broker Protocol

Platikanova, Petya
Australian Accounting Review , Volume Early View – Mar 6, 2023
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25 pages

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Publisher
Wiley
Copyright
© 2023 CPA Australia Ltd (CPA Australia).
ISSN
1035-6908
eISSN
1835-2561
DOI
10.1111/auar.12397
Publisher site
See Article on Publisher Site

Abstract

I provide empirical evidence that labour market frictions have an adverse effect on the quality of analyst research. Using the staggered, voluntary adoption of the Protocol for Broker Recruiting (Protocol) since 2004, I show that, without non‐compete agreements, financial analysts produce more accurate forecasts and exert greater efforts in updating their research more frequently. Consistent with the notion that information asymmetry in the capital market are lower in the post‐Protocol period, I provide empirical evidence and argue that the research coverage by Protocol members enables managers to access capital and extend their investment opportunities. My findings suggest that analyst coverage by Protocol members has a favourable effect on investment in innovative projects, production capacity and acquisitions.

Journal

Australian Accounting Review – Wiley

Published: Mar 6, 2023

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