# Partisan Cities: How Political Alignment Affects Municipal Bonds How does political alignment impact cities' borrowing costs? - **Source:** [Journal of Accounting Research](https://onlinelibrary.wiley.com/journal/1475679x) - **Published:** 2026-07-23 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/4e96d027-e649-4a02-8020-d38e9aad7362 ## Financial Impact of Political Alignment This study examines how political alignment between city leaders and state governors affects information processing and pricing in the municipal bond market. Data from 1,045 U.S. cities between 2005 and 2019 shows that political alignment lowers borrowing costs. ## Difference in Borrowing Costs The research reveals that politically aligned cities face 9 basis points lower borrowing costs compared to misaligned cities. This effect is more pronounced for riskier bonds, in states where governors have greater authority, and for fiscally dependent cities. ## Aid During Fiscal Crisis Politically aligned cities receive more aid during fiscal crises. This shapes how investors interpret and respond to financial information. Misaligned cities face higher costs due to nondisclosure or adverse audit findings. ## Investors' Response Political alignment influences investors' reactions to financial information. Misaligned cities incur higher borrowing costs due to nondisclosure or adverse audit findings, while penalties for aligned cities are significantly lower. ## Governors' Authority In states where governors have greater authority, the impact of political alignment on borrowing costs is stronger. This highlights how governors' influence over cities translates into financial outcomes. ## Conclusion and Importance This study sheds light on the effects of political alignment in the municipal bond market, providing valuable insights for investors and policymakers. Political alignment significantly influences cities' financial performance and investors' decisions. ## Sources covering this story - https://onlinelibrary.wiley.com/doi/10.1111/1475-679x.70041?af=R — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._