Investor Feedback: Impact on Analyst Biases and Investor Critical Evaluation

Nigel J. Barradale, Thomas Plenborg, Simone Stæhr*

*Corresponding author for this work

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Financial analysts (‘sell side’) face incentives that result in biased information for investors (‘buy side’). We examine whether a feedback channel from investors to financial analysts (comparable to the broker vote system) reduces these biases and thereby enhances information efficiency. In a controlled experiment with a monetary payment structure, 344 graduate students assume roles as analysts or investors, with the analysts making earnings recommendations for the investors in the presence of biased incentives. Under the treatment condition, the investors provide feedback to the analysts. Consistent with the monetary incentives built into the broker vote system and psychological theories, the presence of this feedback: (i) reduces bias among analysts; and (ii) enhances investors’ critical evaluation of information. Given the informational benefits of investor feedback, we highlight an unintended consequence of the European Union’s decision to abolish indirect payments to analysts from 2018 onwards.
Original languageEnglish
JournalAccounting and Finance
Issue number1
Pages (from-to)767-803
Number of pages37
Publication statusPublished - Mar 2022

Bibliographical note

Published online: 06 June 2021.


  • Broker votes
  • Financial analysts
  • Forecasts
  • Investor feedback
  • Metacognition
  • Regulation
  • Self-affirmation

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