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Publications
  • May 2023
  • Article
  • Journal of Financial Economics

Political Ideology and International Capital Allocation

By: Elisabeth Kempf, Mancy Luo, Larissa Schäfer and Margarita Tsoutsoura
  • Format:Print
  • | Pages:24
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Abstract

Does investors' political ideology shape international capital allocation? We provide evidence from two settings—syndicated corporate loans and equity mutual funds—to show ideological alignment with foreign governments affects the cross-border capital allocation by U.S. institutional investors. Ideological alignment on both economic and social issues plays a role. Our empirical strategy ensures direct economic effects of foreign elections or government ties between countries are not driving the result. Ideological distance between countries also explains variation in bilateral investment. Combined, our findings imply ideological alignment is an important, omitted factor in models of international capital allocation.

Keywords

Capital Flows; Syndicated Loans; Mutual Funds; Partisanship; Polarization; Elections; Political Ideology; Banks and Banking; Institutional Investing; Behavioral Finance; Decision Choices and Conditions

Citation

Kempf, Elisabeth, Mancy Luo, Larissa Schäfer, and Margarita Tsoutsoura. "Political Ideology and International Capital Allocation." Journal of Financial Economics 148, no. 2 (May 2023): 150–173.
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About The Author

Elisabeth Kempf

Finance
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  • Optimalen Capital Spreadsheet Supplement By: Malcolm Baker, Elisabeth Kempf and Jonathan Wallen
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