Revolving Doors on Wall Street
Kimberly Rodgers Cornaggia
American University - Kogod School of Business
University of Texas at Dallas - Naveen Jindal School of Management
August 22, 2014
Credit analysts often leave rating agencies to work at firms they rate. These analyst transfers provide a unique laboratory for studying revolving door effects. Benchmark rating agencies provide counterfactuals which allow us to measure rating inflation in a difference-in-differences framework. We find that analysts transitioning to managerial positions and to top banks become more favorable to their future employers prior to their transitions. Further, these conflicted ratings become less responsive to changes in market-based measures of hiring firms’ credit quality. Our results reveal the presence of previously untested forces that affect information production by credit analysts.
Number of Pages in PDF File: 63
Keywords: Credit Ratings, Capital Markets Regulation, Human Capital, Regulatory Capture, Revolving Door, Credit Analysts, NRSROs, Analyst Labor Market
JEL Classification: G14, G24, G28, G32working papers series
Date posted: September 23, 2012 ; Last revised: August 31, 2014
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