Changes in trading behavior of analyst-affiliated institutions: the impact of the global analyst research settlement

摘要

This paper examines the impact of the Global Analyst Research Settlement (GS) on the trading behavior of analyst‐affiliated institutions. Using firms with securities class actions, I find that analyst‐affiliated institutions reduce their stockholdings of sued firms prior to their own analyst downgrades, which supports a front‐running hypothesis. This front‐running trading behavior of analyst‐affiliated institutions diminishes for sanctioned institutions after the GS. However, the informed trading behavior of the analyst‐affiliated institutions remains strong for non‐sanctioned institutions, implying that the Global Settlement could not impede non‐sanctioned institutions from front‐running trading activities. This study suggests more regulatory actions are needed to prevent analyst‐affiliated institutions’ misconduct.