Partisanship in Loan Pricing

62 Pages Posted: 7 Oct 2020 Last revised: 2 Nov 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 voter registration data of bankers originating large corporate loans, we show that 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 during periods of intense partisan conflicts, when left- and right-wing media strongly disagree over economic conditions, and for borrowers with limited outside options. Bankers and borrowers do not seem to match on political affiliations. Our results are not driven by bank or borrower fundamentals, but suggest misaligned bankers have more pessimistic outlook than aligned bankers.

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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