NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Partisan Professionals: Evidence from Credit Rating Analysts

Elisabeth Kempf, Margarita Tsoutsoura

NBER Working Paper No. 25292
Issued in November 2018, Revised in April 2019
NBER Program(s):Corporate Finance, Political Economy

Partisan perception affects the actions of financial analysts. Using a novel hand- collected dataset that links credit rating analysts to party affiliations from voter registration records, we show that analysts who are not affiliated with the U.S. president's party are more likely to downward-adjust corporate credit ratings. Our identification approach compares analysts with different party affiliations covering the same firm at the same point in time, ensuring that differences in the fundamentals of rated firms cannot explain the results. The effect is more pronounced for analysts who vote frequently as well as during periods when views of economic conditions are more politically polarized. Our results suggest that analysts' partisan perception and political polarization have implications for the cost of capital of U.S. firms.

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Document Object Identifier (DOI): 10.3386/w25292

 
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