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Board political connections and tradeoff between market and nonmarket advantages: Evidence from corporate financial information disclosure

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  • Xiao, Fenglong
  • Chan, Ann Ling-Ching
  • Chen, Vincent Y.S.

Abstract

We explore the extent to which board political connections shape the firm’s disclosure behavior. We focus on the disclosure of non-GAAP earnings measures and argue that board political connections reduce the firm’s propensity to report non-GAAP earnings through two mechanisms: the reduction in capital market pressure (insulating effect) and the concerns about public scrutiny (constraining effect). Our theory is tested and supported by an analysis of U.S.-listed firms in the period 2003-2019. We further exploit the variation in firms’ media exposure to identify the primary mechanism underlying this disclosure strategy and find that the constraining effect plays a more important role than the insulating effect in driving the financial reporting behavior of politically connected firms.

Suggested Citation

  • Xiao, Fenglong & Chan, Ann Ling-Ching & Chen, Vincent Y.S., 2023. "Board political connections and tradeoff between market and nonmarket advantages: Evidence from corporate financial information disclosure," Journal of Business Research, Elsevier, vol. 164(C).
    • Handle: RePEc:eee:jbrese:v:164:y:2023:i:c:s0148296323003077
    DOI: 10.1016/j.jbusres.2023.113949
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    Cited by:

    1. Xianjing Wang & Shouming Chen & Yueqi Wang, 2023. "The Impact of Corporate Social Responsibility on Speed of OFDI under the Belt and Road Initiative," Sustainability, MDPI, vol. 15(11), pages 1-16, May.

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