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

November 2014


Abstract:     
Using professional profiles posted on LinkedIn, we identify 391 rating analysts who previously work in the structured finance divisions at Moody’s, S&P, or Fitch and later join issuers of mortgage-backed securities (MBS) and asset-backed securities (ABS) from 1997 to 2007. We find that MBS and ABS sold by issuers that employ more former rating analysts experience larger subsequent downgrades, implying that these former analysts may have helped the issuers inflate initial ratings. Further analyses indicate that these analysts may influence initial MBS and ABS ratings through their specialized knowledge in the area of structured finance. Finally, we find that investors of AAA-rated securities do not seem to discount this type of rating inflation associated with former rating analysts.

Number of Pages in PDF File: 45

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: December 10, 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 (November 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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