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

University of Florida

June 30, 2016

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. Our analyses show that when an issuer employs more former rating analysts with structured finance experience at the time it issues MBS or ABS, these securities later have larger rating downgrades than otherwise similarly rated securities. Further analyses indicate that these former rating analysts may have relied on their specialized knowledge in structured finance to influence MBS and ABS initial ratings. Finally, we document that investors largely fail to see through the rating inflation associated with issuers’ hiring of former rating analysts.

Number of Pages in PDF File: 52

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: July 2, 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 (June 30, 2016). Available at SSRN: https://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/
Philip Wang
University of Florida ( email )
Gainesville, FL
United States
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