Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2015
  • Working Paper

Client Service, Compensation, and the Sell-Side Analyst Objective Function: An Empirical Analysis of Relational Incentives in the Investment-Research Industry

By: David A. Maber, Boris Groysberg and Paul M. Healy
  • Format:Print
  • | Language:English
ShareBar

Abstract

This paper investigates how sell-side analysts build and sustain their client networks; the economic gains to successfully managing this challenge; and the metrics through which these incentives are delivered. In a typical semiannual period, the average analyst supplies around 80 research notes and three reports; spends around one week brokering meetings between client investors and corporate managers; and holds approximately 750 private phone calls and 45 oneon-one meetings with client investors. Changes in these client-service actions explain approximately fifty percent of the intertemporal variation in broker votes, a mechanism used to measure the value that client investors ascribe to maintaining continued analyst relations, with the strongest sensitivity observed for widely disseminated, thematic, research reports known as whitepapers. Analysts’ client-service actions, however, explain relatively little intertemporal variation in commissions and broker share of trade execution in their covered stocks. Analysts who strengthen their client networks reap significant rewards and, consistent with the informativeness principle, we find these incentives to be delivered primarily through broker votes, not trades executed in analysts’ covered stocks. Our findings contribute to understanding of the job and objective functions of sell-side analysts and structure of relational incentives in the investment-research industry.

Keywords

Networks; Measurement and Metrics; Operations; Customer Focus and Relationships; Jobs and Positions

Citation

Maber, David A., Boris Groysberg, and Paul M. Healy. "Client Service, Compensation, and the Sell-Side Analyst Objective Function: An Empirical Analysis of Relational Incentives in the Investment-Research Industry." Working Paper, 2015.
  • Read Now

About The Authors

Boris Groysberg

Organizational Behavior
→More Publications

Paul M. Healy

→More Publications

More from the Authors

    • May 2025
    • Faculty Research

    IQanat: Empowering Rural Youth in Kazakhstan

    By: Boris Groysberg and Maxim Pike Harrell
    • May 2025
    • Faculty Research

    Skills-First Talent Management: The Importance of Managers

    By: Boris Groysberg, Nicole Zelazko, Tom Quinn, Robin Abrahams, Izzy Yeoh and Colleen Ammerman
    • May 2025
    • Faculty Research

    Shore Capital Partners: 2025

    By: Boris Groysberg and Kerry Herman
More from the Authors
  • IQanat: Empowering Rural Youth in Kazakhstan By: Boris Groysberg and Maxim Pike Harrell
  • Skills-First Talent Management: The Importance of Managers By: Boris Groysberg, Nicole Zelazko, Tom Quinn, Robin Abrahams, Izzy Yeoh and Colleen Ammerman
  • Shore Capital Partners: 2025 By: Boris Groysberg and Kerry Herman
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College.