Which matters: “Paying to play” or stable business relationship? Evidence on analyst recommendation and mutual fund commission fee paymentHaozhi Huang, Mingsheng Li and Jing Shi Pacific-Basin Finance Journal, 2016, vol. 40, issue PB, 403-423 Abstract: This paper investigates the factors that affect the likelihood of maintaining a stable relationship between a brokerage firm and its client funds and the effect of such a stable business relationship on analyst recommendations. We find that young funds, particularly those in small fund families, have more incentives to maintain business ties with their current brokerage firms. A common ownership affiliation between a fund and a brokerage firm or with a third institution further enhances the probability that the brokerage firm and the funds will maintain a stable relationship. More importantly, analysts issue more optimistic recommendations on stocks that are held by their brokerage firms stably related funds (SRFs) than on stocks that are held by other funds. The effect is more pronounced after excluding large firms. The results are robust after controlling for underwriting relation, commission fees, funds' shareholding and other factors. Keywords: Chinese mutual funds; Open-ended equity funds; Analyst recommendation; Stable business relationship; Customer relationship management (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:40:y:2016:i:pb:p:403-423 DOI: 10.1016/j.pacfin.2016.02.010 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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