Partisan Professionals: Evidence from Credit Rating Analysts
Partisan bias affects the decisions 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 in periods of high partisan conflict and for analysts who vote frequently. Our results suggest that partisan bias and political polarization create distortions in the cost of capital of U.S. firms.
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Document Object Identifier (DOI): 10.3386/w25292