Should financial gatekeepers be publicly traded?

Haozhi Huang, Mingsheng Li, Jing Shi

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


We investigate how a broker firm’s initial public offering (IPO) affects its analysts’ fiduciary duty of providing independent and objective recommendations. We find that the analysts of newly listed broker firms issue more positively biased recommendations in the first 2 to 3 years after their employers’ IPO than before the IPO. The increase in the recommendation bias is greater among analysts of affiliated brokers and brokers that raise additional capital after their IPO than among other analysts. Newly listed broker firms experience significant increases in revenue and trading commission, and the increases are positively related to recommendation bias, after controlling for many other factors. More importantly, recommendation bias decreases as newly listed broker firms season and as the importance of trading commission declines. This suggests that public exposure through a broker firm’s IPO does not enhance the integrity and professional conduct of its financial analysts. Rather, economic incentives make financial analysts more accepting of unethical behavior. The overall results imply that the public trading of financial gatekeepers compromises the ethical relationship between financial service professionals and society in general.
Original languageEnglish
Pages (from-to)175-200
Number of pages26
JournalJournal of business ethics
Issue number1
Early online date31 Oct 2018
Publication statusPublished - 1 Jun 2020


  • Analyst recommendation
  • Broker firms
  • Ethical conduct
  • Financial gatekeepers
  • Initial public offering


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