The effects of MiFID II on sell-side analysts, buy-side analysts, and firms

This paper provides early but broad empirical evidence on MiFID II, which requires investment firms to unbundle investment research from other costs they charge to clients. Employing difference-in-differences matched-sample research designs with firm fixed effects, we find a decrease in the number o...

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Main Authors: FANG, Bingxu, HOPE, Ole-Kristian, HUANG, Zhongwei, MOLDOVAN, Rucsandra
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2020
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Online Access:https://ink.library.smu.edu.sg/soa_research/1920
https://ink.library.smu.edu.sg/context/soa_research/article/2947/viewcontent/MiFID_2020_av.pdf
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spelling sg-smu-ink.soa_research-29472022-01-27T03:57:15Z The effects of MiFID II on sell-side analysts, buy-side analysts, and firms FANG, Bingxu HOPE, Ole-Kristian HUANG, Zhongwei MOLDOVAN, Rucsandra This paper provides early but broad empirical evidence on MiFID II, which requires investment firms to unbundle investment research from other costs they charge to clients. Employing difference-in-differences matched-sample research designs with firm fixed effects, we find a decrease in the number of sell-side analysts covering European firms after MiFID II implementation, particularly for firms that are less important to the sell-side. However, research quality improves; specifically, individual analyst forecasts are more accurate and stock recommendations garner greater market reactions. In addition, sell-side analysts seem to cater more to the buy-side after MiFID II by providing industry recommendations along with stock recommendations. Importantly, we predict and find evidence that buy-side investment firms turn to more inhouse research after MiFID II implementation. Equally interesting, buy-side analysts increase their participation and engagement in earnings conference calls, compared to the control group. We find some evidence that stock-market liquidity decreases post MiFID II. 2020-08-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/soa_research/1920 info:doi/10.1007/s11142-020-09545-w https://ink.library.smu.edu.sg/context/soa_research/article/2947/viewcontent/MiFID_2020_av.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Accountancy eng Institutional Knowledge at Singapore Management University MiFID II Financial services Sell-side analysts Buy-side research Unbundling Hard dollar Europe Accounting Finance and Financial Management Portfolio and Security Analysis
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic MiFID II
Financial services
Sell-side analysts
Buy-side research
Unbundling
Hard dollar
Europe
Accounting
Finance and Financial Management
Portfolio and Security Analysis
spellingShingle MiFID II
Financial services
Sell-side analysts
Buy-side research
Unbundling
Hard dollar
Europe
Accounting
Finance and Financial Management
Portfolio and Security Analysis
FANG, Bingxu
HOPE, Ole-Kristian
HUANG, Zhongwei
MOLDOVAN, Rucsandra
The effects of MiFID II on sell-side analysts, buy-side analysts, and firms
description This paper provides early but broad empirical evidence on MiFID II, which requires investment firms to unbundle investment research from other costs they charge to clients. Employing difference-in-differences matched-sample research designs with firm fixed effects, we find a decrease in the number of sell-side analysts covering European firms after MiFID II implementation, particularly for firms that are less important to the sell-side. However, research quality improves; specifically, individual analyst forecasts are more accurate and stock recommendations garner greater market reactions. In addition, sell-side analysts seem to cater more to the buy-side after MiFID II by providing industry recommendations along with stock recommendations. Importantly, we predict and find evidence that buy-side investment firms turn to more inhouse research after MiFID II implementation. Equally interesting, buy-side analysts increase their participation and engagement in earnings conference calls, compared to the control group. We find some evidence that stock-market liquidity decreases post MiFID II.
format text
author FANG, Bingxu
HOPE, Ole-Kristian
HUANG, Zhongwei
MOLDOVAN, Rucsandra
author_facet FANG, Bingxu
HOPE, Ole-Kristian
HUANG, Zhongwei
MOLDOVAN, Rucsandra
author_sort FANG, Bingxu
title The effects of MiFID II on sell-side analysts, buy-side analysts, and firms
title_short The effects of MiFID II on sell-side analysts, buy-side analysts, and firms
title_full The effects of MiFID II on sell-side analysts, buy-side analysts, and firms
title_fullStr The effects of MiFID II on sell-side analysts, buy-side analysts, and firms
title_full_unstemmed The effects of MiFID II on sell-side analysts, buy-side analysts, and firms
title_sort effects of mifid ii on sell-side analysts, buy-side analysts, and firms
publisher Institutional Knowledge at Singapore Management University
publishDate 2020
url https://ink.library.smu.edu.sg/soa_research/1920
https://ink.library.smu.edu.sg/context/soa_research/article/2947/viewcontent/MiFID_2020_av.pdf
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