Three Essays on Financial Analysts, Investment Banks and Affiliations

This thesis studies how the affiliation between sell-side analysts and institutional investors affects the honesty and accuracy of their equity research. It shows that analysts whose employers own shares in the companies they cover tend to forecast earnings more accurately. It also finds that before an IPO, analysts affiliated to underwriters temporarily boost ratings for peer companies to influence the market. Finally, recent data reveal that institutional investors now trade less on their own analysts’ advice than in the past. The findings highlight ongoing tensions between information advantages and conflicts of interest.