Partisanship in Loan Pricing
49 Pages Posted: 7 Oct 2020 Last revised: 19 Oct 2020
Date Written: September 28, 2020
We document a strong effect of lender partisanship on corporate loan pricing. Using novel data on the voter registration records of bankers in charge of originating large-scale corporate loans, we find that bankers who are registered with a different party from the one represented by the president of the United States ("misaligned bankers") charge 7% higher loan spreads compared to bankers affiliated with the same party as the president. This effect is not explained by bankers’ innate characteristics, borrower fundamentals, or bank-level policies, but is consistent with misaligned bankers having a more pessimistic economic outlook. Despite charging higher interest rates, misaligned bankers do not seem to generate higher revenue than aligned bankers.
Keywords: Partisanship, Politics, Syndicated Loan Pricing, Credit Spreads
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