Does Political Partisanship Cross Borders? Evidence from International Capital Flows

Elisabeth Kempf, Mancy Luo, Larissa Schafer and Margarita Tsoutsoura

No 316, Working Papers from The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State

Abstract: Does partisan perception shape the flow of international capital? We provide evidence from two settings, syndicated corporate loans and equity mutual funds, to show ideological alignment with foreign governments affects the cross-border capital allocation by U.S. institutional investors. Our empirical strategy ensures direct economic effects of foreign elections or government ties between countries are not driving the result. Ideological alignment with foreign countries may also affect capital allocation of non-U.S. investors and can explain patterns in bilateral investment. Combined, our findings imply partisan perception is a global phenomenon and its economic effects transcend national borders.

Date: 2022
New Economics Papers: this item is included in nep-ifn, nep-int and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cbscwp:316

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