Does Partisanship Affect Mutual Fund Information Processing?

This paper studies how partisanship affects mutual fund information processing at the firm level. Using textual analysis of earnings call transcripts, I identify discussions on partisan-sensitive topics, such as climate change, pandemic, and healthcare. I find that partisan funds react more strongly to topics aligned with their ideological beliefs and trade more after firms increase discussions on these topics. The effect is stronger for funds with higher polarization levels and for firms with larger weights in fund portfolios. Moreover, the observed pattern does not add value to fund performance, suggesting that the effect is not driven by rational expectations about future stock returns. Overall, these findings indicate that partisanship plays a role in mutual fund firm-level information processing.