Publication Type

Journal Article

Version

submittedVersion

Publication Date

12-2023

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

Credit Spreads, Partisanship, Politics, Syndicated Loan Pricing

Discipline

Finance and Financial Management

Research Areas

Finance

Publication

Journal of Financial Economics

Volume

150

Issue

3

First Page

1

Last Page

19

ISSN

0304-405X

Identifier

10.1016/j.jfineco.2023.103717

Publisher

Elsevier

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1016/j.jfineco.2023.103717

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