Does Political Partisanship Cross Borders? Evidence from International Capital Flows

42 Pages Posted: 16 Aug 2021 Last revised: 9 Sep 2021

See all articles by Elisabeth Kempf

Elisabeth Kempf

University of Chicago - Booth School of Business; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Mancy Luo

Erasmus University

Larissa Schäfer

Frankfurt School of Finance & Management

Margarita Tsoutsoura

Cornell University; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 8, 2021

Abstract

Does partisan perception shape the flow of international capital? We provide evidence from two settings, syndicated corporate loans and equity mutual funds, to show that ideological alignment with foreign governments affects the cross-border capital allocation by U.S. institutional investors. Moreover, we find that ideological alignment with foreign countries also affects investments of non-U.S. investors and can explain patterns in bilateral FDI flows. Our empirical strategy ensures that direct economic effects of foreign elections or bilateral ties between countries are not driving the result. Combined, our findings imply that partisan perception is a global phenomenon and its economic effects transcend national borders.

Keywords: capital flows, syndicated loans, mutual funds, partisanship, polarization, elections

JEL Classification: G21, G23, G41

Suggested Citation

Kempf, Elisabeth and Luo, Mancy and Schäfer, Larissa and Tsoutsoura, Margarita, Does Political Partisanship Cross Borders? Evidence from International Capital Flows (September 8, 2021). Available at SSRN: https://ssrn.com/abstract=3904077 or http://dx.doi.org/10.2139/ssrn.3904077

Elisabeth Kempf (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://www.chicagobooth.edu/faculty/directory/k/elisabeth-kempf

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

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Mancy Luo

Erasmus University ( email )

Burgemeester Oudlaan 50,
Mandeville Building, Room T08-47,
Rotterdam, 3062PA
Netherlands

HOME PAGE: http://sites.google.com/site/mancyluofinance/

Larissa Schäfer

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Margarita Tsoutsoura

Cornell University ( email )

Ithaca, NY 14853
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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