Isabel Yanyan Wang

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

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.

Private Intermediary Innovation and Market Liquidity: Evidence from the Pink Sheets Tiers of the OTC Market

In 2007, OTC Markets Group assigned each Pink Sheets company to a public disclosure tier and affixed a colorful graphic to its stock symbol signifying the company’s tier. This natural experiment offers a unique setting to investigate if creation of these disclosure tiers and the associated colorful graphics grab investors’ attention, change investors’ trading behavior, and translate into changes in liquidity. Using a difference-in-difference design, we find evidence that firms labeled as (i.e., current information) experienced an increase in liquidity while firms labeled as (i.e., no information) experienced a decrease in liquidity. We also find stock returns around the key event dates leading up to the release of the graphic disclosure tiers are positively associated with the subsequently observed liquidity changes. JEL classification: G12, G14, N20