RT Journal Article
SR Electronic
T1 Research Unbundling and COVID-19: Will Europe’s Capital Markets Recovery Package Help?
JF The Journal of Investing
FD Institutional Investor Journals
SP joi.2021.1.205
DO 10.3905/joi.2021.1.205
A1 Micha Bender
A1 Tino Cestonaro
A1 Peter Gomber
A1 Jascha-Alexander Koch
YR 2021
UL https://pm-research.com/content/early/2021/10/08/joi.2021.1.205.abstract
AB In 2018, the European financial regulation MiFID II introduced research unbundling rules that banned the bundling of research payments with execution costs. The aim of research unbundling is to increase transparency for investors and to avoid agency conflicts. Opponents argue that research unbundling reduces small and medium-sized enterprise (SME) research and, thereby, SMEs’ financing opportunities because this research can no longer be cross-subsidized by research fees paid for larger companies. The outbreak of COVID-19 and its impact on financial markets fueled intense discussions on rebundling for SMEs. Consequently, in February 2021, the European Commission adopted a Capital Markets Recovery Package that allows bundled research for SMEs below a market capitalization of EUR 1 billion. Against this backdrop, the authors conducted a survey among European market participants to investigate changes in research services due to research unbundling and the COVID-19 pandemic. Moreover, they examine market participants’ views on the expected effects and improvements of the option to rebundle SME research as provided by the recovery package.Key Findings▪ MiFID II’s research unbundling led to a drop in research coverage, but did not affect firms’ access to equity.▪ The COVID-19 pandemic did not aggravate the impact of research unbundling on research coverage and firms’ access to equity.▪ Market participants are skeptical about the value of the Capital Markets Recovery Package and believe that the option of bundled payments for SMEs will not be used.