Partisanship in Loan Pricing

55 Pages Posted: 7 Oct 2020 Last revised: 6 Jul 2021

See all articles by Ramona Dagostino

Ramona Dagostino

University of Rochester - Simon Business School

Janet Gao

Indiana University - Kelley 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 novel data on voter registration records of bankers originating large corporate loans, we find a strong partisan effect in loan pricing: Misaligned bankers, i.e., whose party differs from that of the U.S. President, charge 7\% higher loan spreads than aligned bankers. This effect is amplified when partisan conflicts intensify, when left- and right-wing media strongly disagree over economic conditions, and for borrowers with limited alternative credit options. Our result is not explained by borrower or bank fundamentals but is consistent with misaligned bankers having a more pessimistic outlook.

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)

Indiana University - Kelley School of Business ( email )

1309 East Tenth Street
Indianapolis, IN 47405-1701
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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