Partisan Professionals: Evidence from Credit Rating Analysts

93 Pages Posted: 26 Nov 2018 Last revised: 8 Feb 2021

See all articles by Elisabeth Kempf

Elisabeth Kempf

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

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 3 versions of this paper

Date Written: November 2018

Abstract

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 show analysts' partisan perception has sizable price effects on rated firms and may influence firms' investment policies.

Suggested Citation

Kempf, Elisabeth and Tsoutsoura, Margarita, Partisan Professionals: Evidence from Credit Rating Analysts (November 2018). NBER Working Paper No. w25292, Available at SSRN: https://ssrn.com/abstract=3290427

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

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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