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Economic Forum V.138- Red or Blue: Do Banks Care about Borrowers’ Political Ideology?

Post Time: 2017/1/9 16:54:33

On December 20th, 2016, Economic Forum Vol 138 with the topic of "Red or Blue: Do Banks Care about Borrowers’ Political Ideology?" was held successfully in 3rd Meeting Room of Academic Conference Centre, presented by Zhou Jian, Professor of Accounting, University of Hawaii. The Forum, hosted by Prof. Song Xiaobao, attracted students and faculty from Business School and other schools to attend.
The main content of this forum is: we examine whether banks price a borrower’s political ideology, which is proxied by the monetary contribution of a firm’s top managers to Democratic or Republican Party. We find that firms with a Republican ideology have lower loan spreads, larger loans, fewer covenants and lower likelihood of collateral. We also find that the larger the difference of the political ideology between the lender and the borrower, the more unfavorable the bank loan contracting terms are. The relationship between political ideology and bank loan contracting is attenuated if a firm has weak corporate governance, indicating corporate governance complements managerial political ideology.

Students took an active part in the discussion on the topic with Prof. Zhou. As to the questions raised by students, Prof. Zhou gave detailed answers to them patiently.

At the end of the lecture, on behalf of Business School, Prof. Song Xiaobao gave a souvenir to Prof. Zhou, and also organized the faculty and students to have pictures with Prof. Zhou.