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: We document that the quality of earnings reported by politically connected firms is significantly poorer than that of similar non-connected companies. Moreover, we find that earnings quality has no predictive power for the likelihood of establishing connections. Hence, we rule out that our results (on average) are simply due to firms with ex-ante poor earnings quality establishing connections more often. Instead, our results suggest that, because of a lesser need to respond to market pressures to increase the quality of information, connected companies can afford disclosing lower quality accounting information. In particular, lower quality reported earnings is associated with a higher cost of debt only for the non-politically connected firms in the sample.

Keywords: political Ties; information quality (search for similar items in EconPapers)
JEL-codes: G1 G3 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-acc and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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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 (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:21116

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