 CEO political preference and credit ratingsAvishek Bhandari and Joanna Golden Journal of Corporate Finance, 2021, vol. 68, issue C Abstract: This study investigates whether a CEO's personal political ideology, as captured by his or her political contributions, is associated with a firm's credit ratings. Republican CEOs, we find, are associated with higher credit ratings, especially when their firms are headquartered in conservative areas. In addition, the link between political ideology and credit rating is more pronounced in firms that exhibit high financial distress or weak corporate governance. Changes in political ideology are associated with changes in credit rating. Our results support the behavior consistency, upper echelon, and social identity theories, as well as the risk acceptance hypothesis, and are robust to a number of alternative specifications as well as when alternate approaches and measures of credit risk are introduced. Using Republican CEOs as a proxy for conservative CEOs, our evidence implies that credit rating agencies justifiably view a CEO's political ideology and conservatism as indicative of corporate policies and, therefore, as an important determinant of the firm's credit ratings. Keywords: CEO political ideology; Conservatism; Incentives; Agency problem; Corporate governance; Credit ratings; Debt contracting; Debt markets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:68:y:2021:i:c:s0929119921000304 DOI: 10.1016/j.jcorpfin.2021.101909 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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