Preliminary research suggests the latter.
That, at least, is the finding of a paper to be presented at the 1996 Western Finance Association conference in Sunriver, Oregon, in June. The paper examines how possible conflicts of interest within an investment banking firm may affect analyst recommendations of initial public offerings. The possibility of a conflict arises at investment banking firms with both corporate finance and brokerage operations. The corporate finance group generates its profits by, among other things, taking companies public and helping to market their shares. The brokerage group generates profits from stock trading and provides research information to clients to aid in their trading decisions.