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Speaker: Larissa Schaefer, Frankfurt School of Finance & Management

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Abstract

Does political partisanship shape the flow of international capital? We provide evidence from two independent settings, corporate loans and equity mutual funds, to show that political alignment with foreign governments affects the capital allocation decisions of Democratic and Republican investors. Our empirical strategy ensures that direct economic effects of foreign elections or bilateral ties between the U.S. and the foreign countries are not driving the result. Overall, our findings imply that the economic effects of political partisanship transcend national borders.