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Political Ideology and International Capital Allocation

Elisabeth Kempf, Mancy Luo, Larissa Schäfer and Margarita Tsoutsoura

No 29280, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Does investors' political ideology shape international capital allocation? 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. Ideological alignment on both economic and social issues plays a role. Our empirical strategy ensures direct economic effects of foreign elections or government ties between countries are not driving the result. Ideological distance between countries also explains variation in bilateral investment. Combined, our findings imply ideological alignment is an important, omitted factor in models of international capital allocation.

JEL-codes: G11 G15 G21 G23 (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-fdg, nep-ifn, nep-int and nep-pol
Note: CF IFM POL
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Published as Elisabeth Kempf & Mancy Luo & Larissa Schäfer & Margarita Tsoutsoura, 2023. "Political ideology and international capital allocation," Journal of Financial Economics, vol 148(2), pages 150-173.

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Journal Article: Political ideology and international capital allocation (2023) Downloads
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