Sell-side Analysts Study Conflicts Of Interest

This paper examines the conflict of interest between sell-side analyst and asset management department in security companies where the analysts are employed. I compared the rating and earnings forecast between the affiliated analysts and the dependent analysts and found that the analysts will issue a higher rating and higher earnings forecast for a stock that was held by the asset management of the broker house where the analysts were employed. It seems that sell-side analysts face the pressure from the asset management department and the pressure, to some extent, impairs their independence.When we replace the actual net profit by the net after-tax operating profit, the result holds. This means the affiliated analysts are optimistic even after the effect of earnings management is removed.Till now, there is no research on the conflict of interest between the sell-side analysts and asset management of the broker housed where the analysts are employed. I hope this paper could be helpful for the research of the behavior of sell-side analysts.