Do Political Connections Induce More or Less Opportunistic Financial Reporting? Evidence from Close Elections Involving SEC‐Influential Politicians
利用美国国会势均力敌选举中涉及对SEC有影响力的政治人物，研究发现政治关联增加后企业反而报告更少机会主义财务报告，可能源于SEC对关联企业的加强审查。
ABSTRACT This study explores close US congressional elections involving politicians who have influence over the SEC to examine the effect of firms' political connections on their financial reporting. This question is important in understanding the overall effect of political connections on financial reporting. Our difference‐in‐differences tests reveal no evidence that firms experiencing a relative increase in political connections report more opportunistically after close elections in anticipation of preferential treatment by the SEC in its enforcement actions. In contrast, we find evidence that these firms report less opportunistically in response to an increase in their connections with SEC‐influential politicians. Further tests show that our findings are unlikely to be driven by capital market pressure, managerial equity incentives, or corporate governance. Overall, our results are consistent with political connections mitigating opportunistic reporting through enhanced scrutiny by the SEC of politically connected firms' financial reporting. Our findings provide new insights into the interactions among political connections, SEC oversight, and financial reporting by showing how politically connected firms alter their financial reporting in anticipation of differential treatment by the SEC.