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The Quality of Accounting Information in Politically Connected FirmsPaul K. ChaneyVanderbilt University - Accounting Mara FaccioPurdue University - Krannert School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI) David C. ParsleyVanderbilt University - Owen Graduate School of Management; Vanderbilt University July 6, 2010 AFA 2010 Atlanta Meetings Paper Abstract: We document that the quality of earnings reported by politically connected firms is significantly poorer than that of similar non-connected companies. Our results are not due to firms with ex-ante poor earnings quality establishing connections more often. Instead, our results suggest that, because of a lesser need to respond to market pressures to increase the quality of information, connected companies can afford disclosing lower quality accounting information. In particular, lower quality reported earnings is associated with a higher cost of debt only for the non-politically connected firms in the sample.
Number of Pages in PDF File: 48 Keywords: Political connections, information quality, accruals quality JEL Classification: F30, G30, G32, G34, M41, M43 working papers seriesDate posted: March 1, 2007 ; Last revised: November 17, 2012Suggested CitationContact Information
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