The Quality of Accounting Information in Politically Connected Firms

Paul Chaney, Mara Faccio () and David Parsley

MPRA Paper from University Library of Munich, Germany

Abstract: Recent studies have documented systematic exchanges of favors between politicians and firms, and that connected firms, on average gain from political ties. Since these ties are often to a top manager or large shareholder, agency problems are likely more severe for politically connected firms. Moreover, in the case of political ties, the costs of lower quality disclosures may be mitigated. Empirically, we find that the quality of earnings reported by politically connected firms is significantly poorer than that of similar non-connected companies. Additionally, among connected firms, those that have stronger political ties have the poorest accruals quality. This evidence suggests that managers of connected firms appear to be less sensitive to market pressures to increase the quality of information. This choice seems to be justified in that lower quality reported earnings is associated with higher cost of debt only for the non-politically connected firms in the sample.

JEL-codes: G3 (search for similar items in EconPapers)
Date: 2007-02
New Economics Papers: this item is included in nep-hpe
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/6040/1/MPRA_paper_6040.pdf original version (application/pdf)

Related works:
Journal Article: The quality of accounting information in politically connected firms (2011)
Journal Article: The quality of accounting information in politically connected firms (2011)
Working Paper: The Quality of Accounting Information in Politically Connected Firms (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:6040

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().