Abstract

http://ssrn.com/abstract=2442472
 


 



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


John (Xuefeng) Jiang


Michigan State University

Isabel Yanyan Wang


Michigan State University

K. Philip Wang


Michigan State University - Department of Accounting & Information Systems

March 24, 2016


Abstract:     
Using professional profiles posted on LinkedIn, we identify 391 rating analysts who previously worked in the structured finance divisions at Moody’s, S&P, or Fitch and then joined issuers of mortgage-backed securities (MBS) and asset-backed securities (ABS) during the period of 1997-2007. We find that MBS and ABS sold by issuers that employ more former rating analysts experience larger subsequent downgrades. Additional analyses suggest that former analysts rely on their inside knowledge to affect initial ratings of MBS/ABS issuances. Finally, we document that investors hardly see through the rating inflation associated with former rating analysts. Overall, we provide empirical evidence supporting financial regulators’ concern that structured finance issuers hired former rating analysts to game the rating systems so they can get inflated ratings for new MBS/ABS issuances.

Number of Pages in PDF File: 49

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: March 25, 2016

Suggested Citation

Jiang, John (Xuefeng) and Wang, Isabel Yanyan and Wang, K. Philip, Former Rating Analysts and Ratings of MBS and ABS: Evidence from LinkedIn (March 24, 2016). 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/
K. Philip 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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