Political Connections and Voluntary Disclosure: Evidence from Around the World

This study investigates whether and how political connections affect managers’ voluntary disclosure choices. We find that compared to non-connected firms, connected firms issue fewer management earnings forecasts, and the difference is primarily driven by firms in developed capital markets. Further, connected firms, especially those in countries with more developed markets, increase management forecasts subsequent to exogenous political shocks that damage their political ties. We also find that connected firms enjoy a relatively low cost of debt regardless of their voluntary disclosure choices, whereas non-connected firms can lower their cost of debt by providing more voluntary disclosure. Our results are robust to using conference calls as an alternative measure of voluntary disclosure. Overall, our evidence suggests that preferential access to credit and weak capital market incentives shape connected firms’ voluntary disclosure practices.