Sell-Side Analysts, Buy-Side Analysts and Positional Struggles in the Field of Financial Advice

Financial analysts who work for brokerage firms and produce research and investment recommendations to investors - known colloquially as ‘sell-side analysts’ - are established information intermediaries and presumed by academic literature to be an integral part of today’s financial world. Sell-side analysts receive significant attention from the academic literature. Research, for example, focuses on the numerical content of analyst reports and on the accuracy of their predictions (Bradshaw, 2011; Schipper, 1991). Little attention, however, has been paid to the question of how influential sell-side analysts are on investors and, more generally, what roles sell-side analysts actually play in the world of investment decision making (although see Beunza & Garud, 2007; Imam and Spence, 2016). These questions become even more pertinent when we consider that practitioner surveys consistently suggest that investors pay little regard to sell-side information. For example, surveys in the influential Institutional Investormagazine show repeatedly that investors claim they do not incorporate analyst recommendations into their investment decision making processes.

Motivated by the knowledge gap in the academic literature about the practices of sell-side analysts and the discrepancy between the sell-side’s self-perceived significance and that reported by the buy-side, we explore the practices, worldviews and career paths of sell-side analysts. We interviewed 32 top-rated sell-side analysts based in various global financial centres Additionally, we interviewed 10 buy-side practitioners so as to situate the sell-side analyst narratives in a broader context.

In our analysis and theory-building we employ a Bourdieu-inspired conceptual framework (Bourdieu, 2005). From this perspective, we regard investors and sell-side analysts as actors engaged in a struggle for position taking within the field of financial advice, mobilising different forms of capital, in the form of specific types of expertise (Barley, 1996; Sundefur, 2015) in their struggle. This is reflected in the multiple audiences that analysts perceive as relevant and connect with and the diversity of rhetorical and discursive modes of operation that analysts mobilise. Our research, which posits multi-actor dynamics as the core phenomenon, contributes to literature in economic sociology and management about the roles that different actors play in the assessment and evaluation of financial assets and, in particular, about the centrality of valuation and legitimation practices in financial markets. 

References

Barley, S.R. (1996). Technicians in the Workplace: Ethnographic Evidence for Bringing Work into Organizational Studies, Administrative Science Quarterly, 41 (3): 404-441.

Beunza, D and Garud, R. (2007). Calculators, lemmings or frame-makers? The intermediary role of securities analysts, in Callon, M, Millo, Y and Muniesa, F (eds.) Market Devices, Blackwell: Oxford, pp.13-39.

Bourdieu, P. (2005). Social Structures of the Economy, London: Polity Press

Bradshaw, M.T. (2011). Analysts' forecasts: What do we know after decades of work? Available at SSRN 1880339.

 

Imam, S and Spence, C. (2016). Context, not predictions: a field study of financial analysts, Accounting, Auditing and Accountability Journal, in press

Schipper, K. (1991). Analysts’ forecasts. Accounting Horizons, 5 (5), 105-121.

Sundefur, R.L. (2015) Elements of Professional Expertise: Understanding Relational and Substantive Expertise through Lawyers’ Impact, American Sociological Review, 2015, Vol. 80 (5): 909–933