Partisan Professionals: Evidence from Credit Rating Analysts

63 Pages Posted: 9 Jan 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 17, 2020

Abstract

Partisan perception affects the actions of professionals in the financial sector. 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. Since we compare analysts with different party affiliations covering the same firm in the same quarter, 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 price effects and may influence firms' investment policies.

Keywords: analysts, credit ratings, partisanship, polarization, belief disagreement, Trump, elections

JEL Classification: D72, G10, G24, G32

Suggested Citation

Kempf, Elisabeth and Tsoutsoura, Margarita, Partisan Professionals: Evidence from Credit Rating Analysts (November 17, 2020). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3732531

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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