Political Polarization and Finance

Elisabeth Kempf and Margarita Tsoutsoura

No 32792, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We review an empirical literature that studies how political polarization affects financial decisions. We first discuss the degree of partisan segregation in finance and corporate America, the mechanisms through which partisanship may influence financial decisions, and available data sources to infer individuals' partisan leanings. We then describe and discuss the empirical evidence. Our review suggests an economically large and often growing partisan gap in the financial decisions of households, corporate executives, and financial intermediaries. Partisan alignment between individuals explains team and financial relationship formation, with initial evidence suggesting that high levels of partisan homogeneity may be associated with economic costs. We conclude by proposing several promising directions for future research.

JEL-codes: G0 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-cfn and nep-pol
Note: AP CF POL
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Citations: View citations in EconPapers (1)

Published as Elisabeth Kempf & Margarita Tsoutsoura, 2024. "Political Polarization and Finance," Annual Review of Financial Economics, .

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