Revolving doors on Wall Street

Research output: Contribution to journalArticlepeer-review

64 Scopus citations


Credit analysts often leave rating agencies to work at firms they rate. We use benchmark rating agencies as counterfactuals to measure rating inflation in a difference-in-differences framework and find that transitioning analysts award inflated ratings to their future employers before switching jobs. We find no evidence that analysts inflate ratings of other firms they rate. Market based measures of hiring firms' credit quality further indicate that transitioning analysts' inflated ratings become less informative. We conclude that conflicts of interest at the analyst level distort credit ratings. More broadly, our results shed light on the economic consequences of revolving doors.

Original languageEnglish (US)
Pages (from-to)400-419
Number of pages20
JournalJournal of Financial Economics
Issue number2
StatePublished - May 1 2016

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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