Factors Affecting Investment Research - A Study on the Impact of MiFID II on Analyst Coverage

Abstract: This paper studies the effects of MiFID II and firm's performances on analyst coverage. The financial regulation that was imposed in Europe, January 3, 2018, drove analysts to become more transparent with the presentation of their cost structure, leading to unbundling of research and trading costs. Consequently, investment firms had to re-evaluate their research strategy since the margins had decreased. My study applies a Difference-in-Differences Method and Multiple Linear Regression to examine how MiFID II has affected the coverage on Earnings per Share for European Economic Area and North American firms. Consistent with previous papers published in 2019 I present empirical evidence that the amount of firm coverage had decreased after the implementation of MiFID II. However, my results deviate from the preceding studies by showing an increased forecast error compared to pre-MiFID II.