Partisanship in Loan Pricing

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: 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