Journal of International Business Studies

, Volume 49, Issue 3, pp 272–302 | Cite as

Political connections and voluntary disclosure: Evidence from around the world

  • Mingyi Hung
  • Yongtae Kim
  • Siqi Li


Motivated by the international business literature that examines the interactions between political forces and business environments, we investigate whether and how political connections affect managers’ voluntary disclosure choices. We show that compared to non-connected firms, connected firms issue fewer management earnings forecasts. In addition, relative to non-connected firms, connected firms have a greater increase in the frequency of management forecasts subsequent to the elections that damage their political ties. Further analyses suggest that lack of capital market incentives, reduced litigation risk, and lower proprietary costs shape politically connected firms’ unique voluntary disclosure choices.


cross-country study disclosure theories political connections voluntary disclosure 


Motivés par la littérature en international business qui examine les interactions entre les forces politiques et les environnements d’affaires, nous étudions si et comment les connexions politiques influencent les choix de divulgation volontaire des dirigeants. Nous montrons qu’en comparaison aux firmes non-connectées, les firmes connectées émettent moins de prévisions concernant la gestion des bénéfices. De plus, par rapport aux firmes non-connectées, les firmes connectées connaissent une plus forte augmentation de la fréquence des prévisions de gestion suite aux élections qui nuisent à leurs liens politiques. D’autres analyses suggèrent que le manque d’incitations du marché du capital réduit le risque de litiges, et que des coûts propres moins élevés façonnent les choix uniques de divulgation volontaire des firmes connectées politiquement.


Motivados por la literatura de negocios internacionales que examina las interacciones en las fuerzas políticas y los entornos de negocio, investigamos si y cómo las conexiones políticas afectan las opciones de los gerentes a divulgar información voluntariamente. Mostramos qué comparado con las empresas no conectadas, las empresas conectadas emiten menos pronósticos de ganancias de la gestión. Adicionalmente, en relación con las empresas no conectadas, las empresas conectadas tienen mayor aumento en la frecuencia de los pronósticos de gestión empresarial posterior a las elecciones que dañan sus vínculos políticos. Otros análisis sugieren que la falta de incentivos en el mercado de capitales, reduce el riesgo de litigación, y los menores los costos de propiedad configuran las opciones únicas de divulgación voluntaria de las empresas conectadas políticamente.


Motivados pela literatura de negócios internacionais que examina as interações entre forças políticas e ambientes de negócios, investigamos se e como as conexões políticas afetam as escolhas de divulgação voluntárias dos gerentes. Mostramos que, em comparação com empresas não conectadas, as empresas conectadas divulgam menos previsões gerenciais de resultados. Além disso, em relação às empresas não conectadas, as empresas conectadas têm um aumento maior na frequência de previsões gerenciais após eleições que prejudicam seus laços políticos. Análises adicionais sugerem que a falta de incentivos do mercado de capitais, o risco de litígio e custos de propriedade mais baixos definem as distintas escolhas de divulgação voluntárias de empresas politicamente conectadas.





We thank Garry Biddle (the editor), two anonymous reviewers, and the workshop participants at the Hong Kong University of Science and Technology, Singapore Management University, and York University, for their helpful comments. We are grateful to Mara Faccio for generously providing the data on classifications of political connections. We thank Yi-Chun Chen for her valuable research assistance. The work described in this article was supported by the funding from the RGC Research Grant of The Hong Kong University of Science and Technology. Yongtae Kim acknowledges financial support from Robert and Barbara McCullough Family Chair Professorship. Siqi Li acknowledges financial support from Ernst & Young Faculty Research Fellowship.


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Copyright information

© Academy of International Business 2018

Authors and Affiliations

  1. 1.The Hong Kong University of Science and Technology Business SchoolClear Water BayHong Kong
  2. 2.Leavey School of BusinessSanta Clara UniversitySanta ClaraUSA

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