John Jiang

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

Traditional Media, Twitter and Business Scandals

We examine how traditional media and Twitter cover four business scandals: Wells Fargo fake accounts, EpiPen pricing hikes, Samsung Note 7 faulty battery, and Volkswagen’s cheating in emission tests. There are over 500 articles from Wall Street Journal, New York Times, Washington Post and USA Today and over 400 thousand tweets related to these events. Media organizations including newspapers, TV networks, and other media outlets are active Twitter users with significant followers. They only sent 1% of the scandal related tweets, but their tweets account for 39% of Twitter users that follow all scandal related tweets. Newspaper articles are more highly associated with a firm’s abnormal stock returns and trading volumes than individual tweets. Besides disseminating and magnifying the content of traditional media, individuals provide news lead to traditional media through Twitter (e.g., EpiPen). They also lead newspaper coverage (more timely). However, media and individual Twitter users differ in which scandals to cover and disseminate. Overall, we conclude that social media such as Twitter complement rather than substitute traditional media in covering business scandals.

The Need for Better Data Breach Statistics—Reply

Hospital, New Taipei City, Taiwan (Tsai, Wu); Institute of Epidemiology and Preventive Medicine, College of Public Health, National Taiwan University, Taipei, Taiwan (Tsai, Chien, Wu); Department of Marketing and Distribution Management, Oriental Institute of Technology, New Taipei City, Taiwan (Tsai); Department of Internal Medicine, National Taiwan University Hospital and College of Medicine, Taipei, Taiwan (Chien, Wu); Faculty of Medicine, School of Medicine, National Yang-Ming University, Taipei, Taiwan (Wu).