Which matters: "paying to play" or stable business relationship? Evidence on analyst recommendation and mutual fund commission fee payment

Haozhi Huang, Mingsheng Li, Jing Shi

Research output: Contribution to journalArticle

1 Citation (Scopus)


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.
Original languageEnglish
Pages (from-to)403-423
Number of pages21
JournalPacific-Basin finance journal
Issue numberB
Publication statusPublished - Dec 2016
Externally publishedYes



  • Chinese mutual funds
  • open-ended equity funds
  • analyst recommendation
  • stable business relationship
  • customer relationship management

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