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Partisan Professionals: Evidence from Credit Rating Analysts
Author(s) -
KEMPF ELISABETH,
TSOUTSOURA MARGARITA
Publication year - 2021
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.13083
Subject(s) - credit rating , presidential system , quarter (canadian coin) , bond credit rating , perception , democracy , divergence (linguistics) , investment (military) , accounting , business , economics , credit reference , finance , political science , psychology , law , politics , credit risk , linguistics , philosophy , archaeology , neuroscience , history
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 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 that analysts' partisan perception has price effects and may influence firms' investment policies.