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 May 2019
NBER Program(s):The Corporate Finance Program, The Political Economy Program

Partisan perception affects the actions of professionals in the financial sector. Using a novel dataset linking credit rating analysts to party affiliations from voter records, we show that analysts who are not affiliated with the U.S. president's party downward-adjust corporate credit ratings more frequently. By comparing analysts with different party affiliations covering the same firm in the same quarter, we ensure that differences in firm fundamentals cannot explain the results. We also find a sharp divergence in the rating actions of Democratic and Republican analysts around the 2016 presidential election. Our results suggest partisan perception has implications for firms' cost of capital.

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Document Object Identifier (DOI): 10.3386/w25292

 
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