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Political Bias in Credit Ratings

Are Credit Ratings Politically Biased?

Chicago Booth’s Elisabeth Kempf and Cornell’s Margarita Tsoutsoura find evidence that there might be political bias in credit ratings and that finance is also becoming politically polarized. Research reveals that the assessments of credit analysts can reflect their opinions of the sitting president. The researchers mined voter-registration records for the party affiliations of 449 analysts and found among other things that when downgrading a company’s credit rating, analysts who identified as Democrats adjusted a little lower when the president was a Republican and Republican analysts’ pessimism grew when the president was a Democrat.

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