Partisanship in loan pricing

Ramona Dagostino, Janet Gao and Pengfei Ma

Journal of Financial Economics, 2023, vol. 150, issue 3

Abstract: Does partisanship influence the way investors price financial assets? Using voter registration data of bankers originating large corporate loans, we show that bankers whose party differs from that of the U.S. President charge 7% higher loan spreads than other bankers. This effect holds regardless of borrowers’ partisanship, and becomes stronger for politically active bankers and when partisan media exhibit greater disagreement. Bankers do not match disproportionately with co-partisan borrowers but they lead syndicates more frequently with co-partisan bankers. Our results are not driven by bank or borrower fundamentals, but suggest that investor optimism, driven by political alignment, shapes asset prices.

Keywords: Partisanship; Politics; Syndicated Loan Pricing; Credit Spreads (search for similar items in EconPapers)
JEL-codes: D72 G10 G21 G32 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:150:y:2023:i:3:s0304405x23001575

DOI: 10.1016/j.jfineco.2023.103717

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