Abstract
We examine whether politically connected firms play a role in disseminating political information via their management guidance. Using campaign financing activity or the presence of a government affairs office to proxy for firms’ access to political information, we find that politically connected firms are more likely to issue management guidance, and their guidance is more likely to discuss government policies. Further, these relations are attenuated for firms facing high proprietary costs of disclosure. To provide evidence on the source of the political information disclosed through guidance, we examine the timing of when guidance is issued. We find that politically connected firms are more likely to issue guidance and change their government policy–related disclosures prior to the public revelation of government policy decisions. Collectively, these findings suggest that the privileged information firms obtain through their political connections is shared with investors through voluntary disclosures.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 1466-1499 |
| Number of pages | 34 |
| Journal | Review of Accounting Studies |
| Volume | 28 |
| Issue number | 3 |
| DOIs | |
| State | Published - Sep 2023 |
Funding
We thank an anonymous reviewer, Vishal Baloria (discussant), Richard Cazier, Ed deHaan, John Donovan, Elia Ferracuti, Maclean Gaulin, Jeremiah Green, Xiao Han, Mingyi Hung, Zack Kaplan, Russell Lundholm (editor), Jed Neilson, Kyle Peterson, Sarah Rice, Casey Schwab, Nate Sharp, Senyo Tse, Jessica Watkins, Chris Yust, and workshop participants from The Hong Kong University of Science and Technology (HKUST), University of North Texas, Texas A&M University, University of Washington, and the 2019 Dopuch Conference at Washington University in St. Louis for helpful comments and suggestions. This project was started when Morris and Wellman were at University of Utah. We appreciate the financial support from HKUST, University of Utah, University of Oregon, New York University – Shanghai, Kellogg School of Management at Northwestern University, and Smeal College of Business at the Pennsylvania State University. Guidance data are from I/B/E/S. We thank an anonymous reviewer, Vishal Baloria (discussant), Richard Cazier, Ed deHaan, John Donovan, Elia Ferracuti, Maclean Gaulin, Jeremiah Green, Xiao Han, Mingyi Hung, Zack Kaplan, Russell Lundholm (editor), Jed Neilson, Kyle Peterson, Sarah Rice, Casey Schwab, Nate Sharp, Senyo Tse, Jessica Watkins, Chris Yust, and workshop participants from The Hong Kong University of Science and Technology (HKUST), University of North Texas, Texas A&M University, University of Washington, and the 2019 Dopuch Conference at Washington University in St. Louis for helpful comments and suggestions. This project was started when Morris and Wellman were at University of Utah. We appreciate the financial support from HKUST, University of Utah, University of Oregon, New York University – Shanghai, Kellogg School of Management at Northwestern University, and Smeal College of Business at the Pennsylvania State University. Guidance data are from I/B/E/S.
Keywords
- Corporate disclosure
- Information flow
- Management forecasts
- Political connections
ASJC Scopus subject areas
- Accounting
- General Business, Management and Accounting