Partisanship in Loan Pricing

58 Pages Posted: 7 Oct 2020 Last revised: 8 Aug 2022

See all articles by Ramona Dagostino

Ramona Dagostino

University of Rochester - Simon Business School

Janet Gao

McDonough School of Business

Pengfei Ma

Indiana University - Kelley School of Business

Date Written: September 28, 2020

Abstract

Do partisan perceptions influence the way investors price securities? Using voter registration data of bankers originating large corporate loans, we show that bankers whose party differs from that of the U.S. President charge 7% higher loan spreads than other bankers. This effect is amplified when greater partisan disagreement is portrayed in the media, including news articles and political advertisement. Bankers do not match disproportionately with co-partisan borrowers but are more likely to lead syndicates with co-partisan bankers. Our results are not driven by bank or borrower fundamentals. Instead, they suggest that investors’ optimism, driven by political alignment, shapes asset prices.

Keywords: Partisanship, Politics, Syndicated Loan Pricing, Credit Spreads

JEL Classification: G21, G32, G42, G10, D72

Suggested Citation

Dagostino, Ramona and Gao, Janet and Ma, Pengfei, Partisanship in Loan Pricing (September 28, 2020). Available at SSRN: https://ssrn.com/abstract=3701230 or http://dx.doi.org/10.2139/ssrn.3701230

Ramona Dagostino

University of Rochester - Simon Business School ( email )

300 Crittenden Blvd.
Rochester, NY 14627
United States

Janet Gao (Contact Author)

McDonough School of Business ( email )

Washington, DC 20057
United States

Pengfei Ma

Indiana University - Kelley School of Business ( email )

Bloomington, IN 47405
United States

HOME PAGE: http://sites.google.com/view/pengfei

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