Political Information Flow and Management Guidance

56 Pages Posted: 20 Jun 2019 Last revised: 21 Aug 2021

See all articles by Dane M. Christensen

Dane M. Christensen

University of Oregon

Arthur Morris

Hong Kong University of Science & Technology (HKUST) - Department of Accounting

Beverly R. Walther

Northwestern University - Department of Accounting Information & Management

Laura Wellman

Pennsylvania State University; Pennsylvania State University - Department of Accounting; Penn State University

Date Written: August 6, 2021

Abstract

We examine whether politically connected firms play a role in disseminating political
information via their management guidance. Using campaign financing activity or the presence
of a government affairs office to proxy for firms’ access to political information, we find that
politically connected firms are more likely to issue management guidance, and their guidance is
more likely to discuss government policies. Further, these relations are attenuated for firms
facing high proprietary costs of disclosure. To provide evidence on the source of the political
information disclosed through guidance, we examine the timing of when guidance is issued. We
find that politically connected firms are more likely to issue guidance and change their
government policy-related disclosures prior to the public revelation of government policy
decisions. Collectively, these findings suggest that the privileged information firms obtain
through their political connections is shared with investors through voluntary disclosures.

Keywords: Political connections; Information flow; Management forecasts; Corporate disclosure

JEL Classification: D82, D83, G38, G14, M41

Suggested Citation

Christensen, Dane M. and Morris, Arthur and Walther, Beverly R. and Wellman, Laura, Political Information Flow and Management Guidance (August 6, 2021). Available at SSRN: https://ssrn.com/abstract=3403763 or http://dx.doi.org/10.2139/ssrn.3403763

Dane M. Christensen

University of Oregon ( email )

1280 University of Oregon
Eugene, OR 97403
United States

Arthur Morris

Hong Kong University of Science & Technology (HKUST) - Department of Accounting ( email )

Clear Water Bay
Kowloon
Hong Kong

Beverly R. Walther

Northwestern University - Department of Accounting Information & Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-467-1595 (Phone)
847-467-1202 (Fax)

Laura Wellman (Contact Author)

Pennsylvania State University ( email )

378 Business Building
University Park, PA 16802
United States
6026225683 (Phone)

Pennsylvania State University - Department of Accounting ( email )

University Park, PA 16802-3306
United States

Penn State University ( email )

University Park, PA 16802-3306
United States

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