Partisanship in Loan Pricing

49 Pages Posted: 7 Oct 2020 Last revised: 19 Oct 2020

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

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

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
210
Abstract Views
1,424
rank
166,393
PlumX Metrics