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Elisabeth Kempf – Chicago Booth
26 October 2018 @ 10:00 am - 11:30 am
“Partisan Professionals: Evidence from Credit Rating Analysts”
Partisan bias aﬀects the decisions of ﬁnancial analysts. Using a novel hand-collected dataset that links credit rating analysts to party aﬃliations from voter records, we show that analysts who do not support the President’s party are more likely to downgrade ﬁrms. Our identiﬁcation approach compares analysts with diﬀerent party aﬃliations covering the same ﬁrm at the same point in time, ensuring that diﬀerences in the fundamentals of rated ﬁrms cannot explain the results. The eﬀect is more pronounced in periods of increased partisan conﬂict and during election quarters. Overall, our results suggest that partisan bias and political polarization may have adverse eﬀects on the U.S. economy.