Voluntary Disclosure of Corporate Political Spending

61 Pages Posted: 22 Sep 2018

See all articles by Lisa Goh

Lisa Goh

Hang Seng University of Hong Kong - Department of Accountancy

Xuejiao Liu

University of International Business and Economics

Albert Tsang

York University - Schulich School of Business

Date Written: August 28, 2018

Abstract

In this paper, we study voluntary political spending disclosure, a widespread yet relatively unexplored corporate voluntary disclosure practice. Using an index created by the CPA-Zicklin Center that measures the level of voluntary political spending disclosure for S&P 500 firms, we examine firm-level characteristics associated with such disclosures, and their importance. We find that firms with greater political expenditures, direct political connections, higher investor activism, better corporate social responsibility performance and governance, and more industry competition tend to have a higher level of political spending disclosure. We also find that a higher level of political spending disclosure is positively associated with both the number of institutional investors and the proportion of shares owned by institutional investors, particularly socially responsible institutional investors, after controlling for the quality of other disclosures. The level of political spending disclosure is also associated with a higher analyst following, lower forecast error, and smaller forecast dispersion. Finally, we find that political spending disclosure enhances the positive relationship between annual corporate political spending and firm financial performance. Together, these results are consistent with the view that voluntary political spending disclosure helps align managers’ interests with those of shareholders.

Keywords: Financial Analysts, Institutional Investors, CSR, Political Spending, Voluntary Disclosure, Lobbying

JEL Classification: D72, G30, M14, M38, M40

Suggested Citation

Goh, Lisa and Liu, Xuejiao and Tsang, Albert, Voluntary Disclosure of Corporate Political Spending (August 28, 2018). Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3243149

Lisa Goh (Contact Author)

Hang Seng University of Hong Kong - Department of Accountancy ( email )

Hang Shin Link
Siu Lek Yuen
Shatin, Hong Kong
China

Xuejiao Liu

University of International Business and Economics ( email )

Beijing, Beijing
China

Albert Tsang

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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