Evolución de la Información hacia el conocimiento

In the years immediately following GS, the independent research industry expanded rapidly. There were fewer than 50 independent equity research providers in 2000, and this number increased to around 350–400 firms in 2005 and 989 in 2008 (Kim, 2005; Retkwa, 2009). According to Sanford Bragg, Chief Executive of Integrity Research, which tracks the independent research industry, ‘It was like a big gold rush when everybody wanted to be an independent research provider’ (LaCapra, 2012). However, Buslepp et al. (2014) document that only 62 independent research firms were employed by the GS signatories during the five years of the GS period.21 _{Much of the observed growth appears to represent}

new research firms that were unsuccessful in winning GS-mandated business, or it may reflect other factors related to GS that increased demand for research boutiques. For example, it is plausible that there was a decrease in sell-side research staff and budgets after the separation of research from investment banking revenue required by the 2002/3 reforms, and this may have resulted in sell-side analysts setting up their own speciality research firms (Groysberg & Healy, 2013; Morten, 2011).

3.3.1.1 Hypothesis 9: Effect of the Expiration of Funding Independent Research on Analyst Behaviour

Given that independent analysts have no investment banking-related incentives to bias their research, their objectives are likely to be more closely aligned with those of investors (Gu & Xue, 2008), and consequently they should, all else equal, issue less biased forecasts than other analysts. Prior studies find evidence of lesser optimistic bias in independent

21_{Buslepp et al. (2014) collect the names of the 62 independent research providers based on the annual} reports submitted by independent consultants who were designated GS signatories to oversee the procurement of the independent research. The submitted annual reports can be requested from the NYAG’s office under the Freedom of Information Act.

analysts’ research reports. Malmendier and Shanthikumar (2014) report that the average optimism reflected in recommendations issued by independent researchers is significantly lower than that by unaffiliated and affiliated analysts. Consistent with the intention of GS, Allee et al. (2018) find that target prices issued by independent analysts between 2011 and 2015 are less optimistic than those issued by analysts employed by investment banks. The authors also examine the fundamental inputs of independent analysts’ target prices, such as the optimism and accuracy of independent analysts’ LTG forecasts, earnings per share (EPS) forecasts and cost of equity capital estimates, and they suggest that lower optimism in independent analysts’ target prices likely stems from their more conservative LTG forecasts. Further, Xue (2017) posits that for independent analysts, the timeliness of unfavourable recommendations is greater than that of favourable recommendations. The literature also suggests the existence of a disciplining effect of independent analysts’ research on the quality of analyst reports of those employed by investment banks. Gu and Xue (2008) find that the presence of independent analyst coverage for a firm appears to lower the forecast bias and improve the forecast accuracy and relevance of reports issued by non-independent analysts.

H9 investigates the effectiveness of the stipulation in the GS that required signatory banks to procure and disseminate independent research reports to their clients for a period of five years. These requirements were intended to improve the objectivity of the research reports issued by the signatories’ own analysts. If the independent research procured and provided by the GS signatories over the five-year period effectively improved the objectivity of analyst research (i.e., the disciplining effect), I expect that there may be a subsequent deterioration in objectivity following the expiration of the requirement to fund independent research in 2009/10. This suggests that there may be an increase in the optimism of research outputs issued by analysts whose employers are GS signatory banks after they ceased funding and providing independent research. H9, which addresses the

effect of the 2009/10 expiration of the five-year obligation required by GS on optimism in properties of analyst reports issued by GS-sanctioned banks, is stated as follows:

H9: The change in the optimism of analyst recommendation (forecast) revisions following

the expiration of independent research funding is more positive for analysts employed by GS signatories than for other analysts.

3.3.1.2 Hypothesis 10: Effect of the Expiration of Funding Independent Research on Affiliated Analyst Behaviour

H10 examines whether the association between analyst optimism and the effect of the 2009/10 expiration of funding independent research is stronger for analysts employed by GS signatory firms that are affiliated with the covered firms through investment banking ties. I propose that any change in analyst behaviour attributable to the effect of the 2009/10 expiration on GS signatory firms will be stronger for their affiliated analysts than for unaffiliated analysts. Before the period of mandatory procurement of independent research, affiliated analysts employed by investment banks had incentives to issue overly optimistic reports to their clients with a view to retaining or winning the advisory or underwriting mandates for their employers.

During the five-year procurement period, while the provision of concurrent independent research reports should discipline both affiliated and unaffiliated analysts’ behaviour, there are two reasons why this disciplinary effect on affiliated analysts should be greater than the effect on unaffiliated analysts. First, analysts whose GS signatory employers are affiliated with the covered acquirers or issuers are subject to stronger conflicts of interest because of their greater investment banking incentives. Second, any herding behaviour by independent analysts would reinforce the disciplining effect of independent research on affiliated analysts’ reports (Xue, 2017). Prior studies suggest that independent research analysts are likely to ‘herd’ with affiliated analysts because these analysts have the

greatest information advantage (Jacob, Rock, & Weber, 2008), which motivates affiliated analysts to acquire more ex ante information (Xue, 2017).

If the five-year procurement of independent research effectively reduced excess optimism in affiliated analysts’ reports, following the disciplining argument, after the expiration in 2009/10, there should be an increase in optimism among affiliated analysts who are employed by GS. I propose that the increase in analyst optimism is greater for affiliated analysts relative to unaffiliated analysts. Accordingly, H10 is stated as follows:

H10: The change in the optimism of analyst recommendation (forecast) revisions

following the expiration of independent research funding is more positive for affiliated analysts whose employers are GS signatories than for unaffiliated analysts whose employers are GS signatories.

Like the earlier hypotheses, I test H9 and H10 using measures of analyst behaviour surrounding key investment banking transactions.

3.3.2 Market Effect of the Expiration of Funding Independent Research on