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Corporate Lobbying, Visibility and Accounting Conservatism

46 Pages Posted: 19 Oct 2011 Last revised: 1 Mar 2017

Xiangting Kong

Zhongshan University - School of Business

Suresh Radhakrishnan

University of Texas at Dallas - School of Management

Albert Tsang

Schulich School of Business

Date Written: October 1, 2013

Abstract

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.

Keywords: Political connection, visibility, lobbying, accounting conservatism

JEL Classification: M41, D72, P16

Suggested Citation

Kong, Xiangting and Radhakrishnan , Suresh and Tsang, Albert, Corporate Lobbying, Visibility and Accounting Conservatism (October 1, 2013). Available at SSRN: https://ssrn.com/abstract=1946184 or http://dx.doi.org/10.2139/ssrn.1946184

Xiangting Kong

Zhongshan University - School of Business ( email )

School of Business
Sun Yat-Sen University
Guangzhou, Guangdong 510275
China
+8613430289017 (Phone)

Suresh Radhakrishnan (Contact Author)

University of Texas at Dallas - School of Management ( email )

2601 North Floyd Road
Richardson, TX 75083-0688
United States
972-883-4438 (Phone)
972-883-6811 (Fax)

Albert Tsang

Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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