Partisan Professionals: Evidence from Credit Rating Analysts

By Elisabeth Kempf, Margarita Tsoutsoura. Journal of Finance, 2018

124 citations recorded by the source corpus.

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.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/75fdfba7ef64c391cf611e858736559050d48b73

Citations in the corpus

• Climate Regulatory Risks and Corporate Bonds (2020, unknown): “11 Our paper is also related to Li et al. (2019) who examine how a change in environmental policy in China affected investor choices and Kempf and Tsoutsoura (2020) who examine how the Trump election affected credit ratings by partisan analysts. decreased credit ratings and higher yield spreads,…”