Optimism bias in financial analysts' earnings forecasts: Do commissions sharing agreements reduce conflicts of interest?
VAUBOURG, Anne Gaël
Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]
Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]
VAUBOURG, Anne Gaël
Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]
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Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]
Language
EN
Article de revue
This item was published in
Economic Modelling. 2017-12-01, vol. 67, p. 325-337
English Abstract
Implemented in May 2007, the French rules governing commission-sharing agreements (CSAs) consist of unbundling brokerage and investment research fees. The goal of this paper is to analyze the effect of these rules on ...Read more >
Implemented in May 2007, the French rules governing commission-sharing agreements (CSAs) consist of unbundling brokerage and investment research fees. The goal of this paper is to analyze the effect of these rules on analysts' forecasts. Based on a sample of one-year-ahead earnings per share forecasts for 58 French firms during the period from 1999 to 2011, we conduct panel data regressions. We show that the analysts' optimistic bias declined significantly after CSA rules, which suggests that these rules are effective at curbing the conflicts of interest between brokerage activities and financial research. Our results are robust to the impact of the Global Settlement and the Market Abuse Directive.Read less <