ESMA: Investor Protection : MiFID II research unbundling – first evidence
Context : ESMA Report on Trends, Risks and Vulnerabilities
Article : Investor Protection : MiFID II research unbundling – first evidence (pages 81 to 92)
This article analyses the impact on EU sell-side research of the MiFID II Research Unbundling provisions that require portfolio managers to pay for the research they obtain.
In the past, concerns have been raised, based primarily on survey data, that the new rules could have detrimental effects on the availability and quality of company research in the EU.
In order to provide a more detailed, data-based contribution to inform this discussion, we examine a sample of 8,000 EU listed companies between 2006 and 2019, and do not find material evidence of harmful effects from these rules.
The introduction of MiFID II has not led to a significant difference in the number of analysts producing Earnings per Share (EPS) estimates (‘research intensity’).
Recent increases in the number of companies no longer being covered by research analysts (‘research coverage’) appear to be a continuation of a long-term trend. The quality of research has been steadily improving in recent years. SMEs do not appear to be disproportionately affected in terms of research intensity, research coverage, and research quality.
The descriptive findings in this article are consistent with the emerging data-based academic literature on the impact of the MiFID II research unbundling provisions and are complemented by a forthcoming ESMA econometric study. Further assessment of the impact of the MiFID II research unbundling provisions on subsets of the EU market for research, such as the impact on sponsored research, will be interesting avenues for further study.
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