Revolving Doors on Wall Street
Kimberly Rodgers Cornaggia
American University - Kogod School of Business
University of Texas at Dallas - Naveen Jindal School of Management
May 12, 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-difference framework. We find that transitioning analysts 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: 56
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: May 13, 2014
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