Partisan Professionals: Evidence from Credit Rating Analysts

Abstract

Partisan perception affects the actions of professionals in the financial sector. Linking credit rating analysts to party affiliations from voter records, we show that analysts who are not affiliated with the U.S. president's party downward-adjust corporate credit ratings more frequently. Since we compare analysts with different party affiliations covering the same firm in the same quarter, differences in firm fundamentals cannot explain the results. We also find a sharp divergence in the rating actions of Democratic and Republican analysts around the 2016 presidential election. Our results show analysts' partisan perception has price effects and may influence firms' investment policies.

Keywords: analysts, credit ratings, partisanship, polarization, belief disagreement, Trump, elections

JEL Classification: D72, G10, G24, G32