Political Corruption and Accounting Conservatism

Lingmin Xie, Jeong-Bon Kim and Tao Yuan

European Accounting Review, 2025, vol. 34, issue 1, 279-305

Abstract: We investigate how local political corruption shapes corporate financial reporting conservatism. Using a large sample of U.S. public firms, we find that firms located in areas with higher levels of political corruption tend to adopt greater accounting conservatism. We also find that firms in more corrupt areas bear greater political expropriation costs. Further analysis reveals that the positive effect of corruption on conservatism is stronger for firms with less bargaining power against corrupt officials, firms with lower public visibility, and firms with weaker dependence on the government for sales. Overall, our findings support the expropriation hypothesis that corrupt officials have incentives to expropriate resources from local firms, which induces them to adopt more conservative reporting strategies to shield their assets.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/09638180.2023.2242399 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:taf:euract:v:34:y:2025:i:1:p:279-305

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/REAR20

DOI: 10.1080/09638180.2023.2242399

Access Statistics for this article

European Accounting Review is currently edited by Laurence van Lent

More articles in European Accounting Review from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().