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Firm partisan positioning, polarization, and risk communication: Examining voluntary disclosures on COVID‐19

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  • Richard A. Benton
  • J. Adam Cobb
  • Timothy Werner

Abstract

Research Summary The COVID‐19 pandemic will rank among the greatest challenges many executives will have faced and not only due to the operational challenges it posed. Upon entering the U.S. context, the disease was immediately politically polarized, with clear partisan splits forming in risk perceptions of the disease unrelated to science. We exploit this context to examine whether firms' partisan positioning affects whether and how they communicate risk to their investors on a polarized public policy issue. To do so, we examine the covariation between firms' disclosure of COVID‐19 risks and the partisanship of their political giving. Our analysis of earnings call and campaign contribution data for the S&P 500 reveals a positive association between a firm's contributions to Democrats and its disclosure of COVID‐19 risks. Managerial Summary From its onset in the United States, attitudes toward and discourse around the COVID‐19 pandemic was heavily politicized and perceptions of the disease's risks were seen as more serious by Democratic‐identifying individuals than Republican identifiers. In this study, we examine whether this pattern also holds for U.S. publicly traded firms, who can also stake out a political position through their corporate political action committee campaign contributions. In analyses of earnings call transcripts from the first quarter of 2020, we show that the more Republican‐leaning (Democrat‐leaning) a firm's campaign contributions are, the less (more) likely it was to voluntarily disclose risks related to COVID‐19. We argue that these findings hold implications for parties interested in interpreting firm's risk disclosures on politically polarized issues.

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  • Richard A. Benton & J. Adam Cobb & Timothy Werner, 2022. "Firm partisan positioning, polarization, and risk communication: Examining voluntary disclosures on COVID‐19," Strategic Management Journal, Wiley Blackwell, vol. 43(4), pages 697-723, April.
  • Handle: RePEc:bla:stratm:v:43:y:2022:i:4:p:697-723
    DOI: 10.1002/smj.3352
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    1. Beata Zyznarska-Dworczak & Kristina Rudžionienė, 2022. "Corporate COVID-19-Related Risk Disclosure in the Electricity Sector: Evidence of Public Companies from Central and Eastern Europe," Energies, MDPI, vol. 15(16), pages 1-21, August.
    2. Lamare, J. Ryan & Benton, Richard A. & Tabarani, Patricia Michel, 2024. "An empirical analysis of race and political partisanship effects on workplace mobility patterns during lockdown, reopening, and endemic COVID-19," LSE Research Online Documents on Economics 125302, London School of Economics and Political Science, LSE Library.
    3. Stephanie Lu Wang & Yejee Lee & Dan Li, 2024. "Smart disclosure: an enabler for multinationals to reduce human rights violations in global supply chains," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 55(4), pages 450-469, June.
    4. Zhi Tang & Yang Yu, 2023. "American Economic Stakeholder Sentiments towards Chinese Firms’ Innovation Capability: The Role of State Political Environment and Firm Ownership," Sustainability, MDPI, vol. 15(18), pages 1-22, September.

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