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  • December 2021
  • Article
  • Journal of Finance

Partisan Professionals: Evidence from Credit Rating Analysts

By: Elisabeth Kempf and Margarita Tsoutsoura
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Abstract

Partisan perception affects the actions of professionals in the financial sector. Using a novel dataset linking credit rating analysts to party affiliations from voter records, we show that analysts who are not affiliated with the U.S. president’s party downward-adjust corporate credit ratings more frequently. By comparing analysts with different party affiliations covering the same firm in the same quarter, we ensure that differences in firm fundamentals cannot explain the results. We also find a sharp divergence in the rating actions of Democratic and Republican analysts around the 2016 presidential election. Our results show analysts’ partisan perception affects firms’ cost of capital and investment policies.

Keywords

Political Affiliation; Credit Rating Agencies; Political Partisanship; Political Elections; Perception; Credit

Citation

Kempf, Elisabeth, and Margarita Tsoutsoura. "Partisan Professionals: Evidence from Credit Rating Analysts." Journal of Finance 76, no. 6 (December 2021): 2805–2856.

Supplemental Information

Internet Appendix
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About The Author

Elisabeth Kempf

Finance
→More Publications

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    The Political Polarization of Corporate America

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More from the Authors
  • Political Ideology and International Capital Allocation By: Elisabeth Kempf, Mancy Luo, Larissa Schäfer and Margarita Tsoutsoura
  • The Political Polarization of Corporate America By: Vyacheslav Fos, Elisabeth Kempf and Margarita Tsoutsoura
  • Fifty Shades of QE: Comparing Findings of Central Bankers and Academics By: Brian Fabo, Marina Jančoková, Elisabeth Kempf and Ľuboš Pástor
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