Implications of Political Patronage and Political Costs for Corporate Disclosure
利用2006年上海社保腐败丑闻，研究发现涉案关联企业在丑闻前信息披露水平较低，丑闻后显著增加披露，且增加的内容具有价值相关性，反映了企业应对政治成本压力的策略。
We take advantage of China’s relationship-based institutional setting to investigate whether and how firms’ disclosure decision is affected by political patronage and associated political costs considerations. Using a sample of 65 firms involved in the Shanghai Pension corruption scandal of 2006, we find that relative to benchmark firms, the connected firms are associated with lower levels of disclosure prior to the scandal. However, they significantly increased their disclosures in the year immediately following the public exposure of the scandal. A content analysis indicates that the increased disclosures are value-relevant, and are not merely used as a public relations effort to subdue public outcry in the immediate aftermath of the scandal. Cross-sectional analyses further reveal that the increase in disclosure is positively associated with the extent of firm’s guanxi dependence and type/severity of involvement in the scandal. We conclude that the increased disclosures are in response to the heightened risk and potential costs of regulatory and public scrutiny in the wake of a major event involving high political and public sensitivity. The evidence is supportive of the political costs hypothesis, and has important managerial and policy implications.