Partisan Professionals: Evidence from Credit Rating Analysts
Elisabeth Kempf, Assistant Professor of Finance
Recent evidence suggests a large increase in polarization across political parties (e.g., Iyengar, Sood, and Lelkes (2012), Mason (2013), Mason (2015), Gentzkow (2016), Boxell, Gentzkow, and Shapiro (2017)). In particular, there is an increasing tendency of voters to view the world through a “partisan perceptual screen.” 2 For example, their assessment and interpretation of economic conditions depends on whether the White House is occupied by the party they support. Despite this evidence, it remains unclear to what extent political polarization may affect the U.S. economy. A focal point of the academic debate on the subject is whether partisan bias actually translates into differences in the behavior of economic agents. For households, researchers have documented that partisan bias affects households’ assessment of future economic conditions (e.g., Gerber and Huber (2009) and Mian, Sufi, and Khoshkhou (2017)). Yet, evidence on actual economic behavior is mixed. 3 Whether partisan bias can affect the decisions of economic agents beyond households and, in particular, those of agents in professional environments, is an even less explored question.
In this project, we aim to fill this gap by investigating whether partisan bias affects the actions of an important set of finance professionals. Studying the effect of partisan bias on professional decision- making poses a number of empirical challenges. First, it requires observing decisions by individual agents that make relevant economic decisions. Second, these agents need to be linked to information about their party affiliation. Third, in order to be able to rule out alternative explanations, it is necessary to compare the decisions of individuals with different political affiliations on the same task and in the same environment.
Partisan Professionals: Evidence from Credit Rating Analysts, (M.Tsoutsoura), The Journal of Finance, Volume76, Issue 6, December 2021, Pages 2805-2856.