Policy Uncertainty, Earnings Management and the Role of Political Connections

46 Pages Posted: 21 Apr 2022

See all articles by Moritz Hölzer

Moritz Hölzer

University of Bremen - Faculty of Business Studies and Economics - Chair of Accounting and Control

Thomas R. Loy

University of Bremen

Jochen Zimmermann

University of Bremen - Faculty of Business Studies and Economics; University of Bremen - Chair of Accounting and Control

Date Written: March 23, 2022

Abstract

Extant literature engages with the question how political uncertainty shapes firms’ financial disclosures and earnings management choices. We show that political connections are an efficient risk management response to political uncertainty. More specifically, we show that lobbying moderates the positive association of political uncertainty and earnings management. As such, we contribute to the vibrant field of research at the intersection of political sciences and business economics. Our study is robust to different specifications of earnings management, potential self-selection bias as well as omitted variable concerns.

Keywords: Policy uncertainty, earning management, political connections, lobbying

Suggested Citation

Hölzer, Moritz and Loy, Thomas R. and Zimmermann, Jochen and Zimmermann, Jochen, Policy Uncertainty, Earnings Management and the Role of Political Connections (March 23, 2022). Available at SSRN: https://ssrn.com/abstract=4052786 or http://dx.doi.org/10.2139/ssrn.4052786

Moritz Hölzer

University of Bremen - Faculty of Business Studies and Economics - Chair of Accounting and Control ( email )

Universitaetsallee GW I
Bremen, D-28334
Germany

Thomas R. Loy (Contact Author)

University of Bremen ( email )

Universitaetsallee GW I
Bremen, D-28334
Germany

Jochen Zimmermann

University of Bremen - Chair of Accounting and Control ( email )

Universitaetsallee GW I
Bremen, D-28334
Germany
+49 421 218-9119 (Phone)

HOME PAGE: http://www.controlling.uni-bremen.de

University of Bremen - Faculty of Business Studies and Economics ( email )

Hochschulring 4
Germany
+49 421 218 9121 (Phone)

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