Partisan Professionals: Evidence from Credit Rating Analysts

94 Pages Posted: 29 Jan 2020 Last revised: 29 Jun 2020

See all articles by Elisabeth Kempf

Elisabeth Kempf

University of Chicago - Booth School of Business; Centre for Economic Policy Research (CEPR)

Margarita Tsoutsoura

Cornell University; National Bureau of Economic Research (NBER)

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Date Written: January 2020

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 has sizable price effects on rated firms and may influence firms' investment policies.

Suggested Citation

Kempf, Elisabeth and Tsoutsoura, Margarita, Partisan Professionals: Evidence from Credit Rating Analysts (January 2020). CEPR Discussion Paper No. DP14343, Available at SSRN: https://ssrn.com/abstract=3526069

Elisabeth Kempf (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://www.chicagobooth.edu/faculty/directory/k/elisabeth-kempf

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Margarita Tsoutsoura

Cornell University ( email )

Ithaca, NY 14853
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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