SSRN-Do Analyst Conflicts Matter? Evidence from Stock Recommendations by Anup Agrawal, Mark Chen
Agrawal and Chen have a really cool paper that looks at conflicts of interest with investment bankers and their affiliated brokerages. They find sure enough that the conflicts of interest do influence recommendations. However, the authors also make a pretty convincing case that these conflicts and biased recommendations probably are known by investors and therefore the market place is not tricked.
I'll try to find some time to write more about this paper soon. It is definitely worth reading!
Agrawal, Anup and Chen, Mark, "Do Analyst Conflicts Matter? Evidence from Stock Recommendations" (March 2005). http://ssrn.com/abstract=654281