Corporate Lobbying, Visibility and Accounting Conservatism
Zhongshan University - School of Business
University of Texas at Dallas - School of Management
The Chinese University of Hong Kong (CUHK) - School of Accountancy
October 1, 2013
In this study, we examine the role of firms’ visibility in shaping the relationship between accounting conservatism and political connectedness measured using corporate lobbying expenditures in the U.S. Firms’ visibility is measured using four variables – the number of analysts following the firm, the age of the firm, the number of foreign stock exchanges that the firm is cross-listed in and the number of public disclosures the firm makes. To control for differences in firm characteristics between lobbying and non-lobbying firms, the lobbying firms, i.e., the treatment firms are matched with a control group using propensity scores. We find that the positive association between corporate lobbying activities and accounting conservatism is more pronounced for lobbying firms with higher visibility. We also find that change in lobbying intensity predicts future changes in accounting conservatism and not vice versa; this suggests that corporate lobbying Granger-causes accounting conservatism. Collectively, these results suggest that public visibility plays an important role in the relationship between political connection and accounting conservatism.
Number of Pages in PDF File: 46
Keywords: Political connection, visibility, lobbying, accounting conservatism
JEL Classification: M41, D72, P16
Date posted: October 19, 2011 ; Last revised: January 10, 2015
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