Abstract

http://ssrn.com/abstract=2442472
 


 



Former Rating Analysts and the Ratings of MBS and ABS: Evidence from LinkedIn


John (Xuefeng) Jiang


Michigan State University

Isabel Yanyan Wang


Michigan State University

Kailong (Philip) Wang


Michigan State University - Department of Accounting & Information Systems

May 1, 2014


Abstract:     
Using self-posted profiles on LinkedIn, we identify 391 rating analysts who previously work in the structured finance divisions of Moody’s, S&P or Fitch but later join issuers of mortgage-backed securities (MBS) and asset-backed securities (ABS) from 1997 to 2007. We find that MBS and ABS issued by firms that employ more former rating analysts suffer larger downgrades subsequently, implying that these former analysts help issuers inflate the initial ratings. Further analyses suggest former analysts influence ratings through their specialized knowledge in structured finance. We also find investors in AAA rated securities do not price the risk of rating inflation induced by former analysts.

Number of Pages in PDF File: 40

Keywords: Credit Analysts, Rating Analysts, Credit Ratings, Mortgage-Backed Securities, Asset-Backed Securities, MBS, ABS, Financial Crisis, LinkedIn, Revolving Door, Moody’s, S&P, Fitch

JEL Classification: G1, G21, G24, G28, L1

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Date posted: May 28, 2014 ; Last revised: June 4, 2014

Suggested Citation

Jiang, John (Xuefeng) and Wang, Isabel Yanyan and Wang, Kailong (Philip), Former Rating Analysts and the Ratings of MBS and ABS: Evidence from LinkedIn (May 1, 2014). Available at SSRN: http://ssrn.com/abstract=2442472 or http://dx.doi.org/10.2139/ssrn.2442472

Contact Information

John (Xuefeng) Jiang (Contact Author)
Michigan State University ( email )
270 North Business Complex
East Lansing, MI 48824-1034
United States
517-432-3031 (Phone)
517-432-1101 (Fax)
HOME PAGE: http://www.msu.edu/~jiangj/
Isabel Wang
Michigan State University ( email )
N233 Business Complex
Broad School of Business
East Lansing, MI 48824-1122
United States
HOME PAGE: http://www.msu.edu/~wangyany/
Kailong Wang
Michigan State University - Department of Accounting & Information Systems ( email )
242 North Business Complex
East Lansing, MI 48824-1034
United States
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