Political connections and seasoned equity offerings

Nnadi, Modestus I.; Sorwar, Ghulam; Eskandari, Rasol; Chizema, Amon

doi:10.1016/j.jbankfin.2021.106312

Cited by 9 publications

(8 citation statements)

References 105 publications

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“…Footnotes 1. Following prior relevant studies (e.g., Kong et al, 2017;Hung et al, 2018;Nnadi et al, 2021), we use the terms political connections, political ties, political connectedness, political strategies, political involvement, and political activity interchangeably.…”

Section: Discussionmentioning

confidence: 99%

Corporate political activism, information transparency and IPO compliance costs

Gounopoulos

Loukopoulos

2023

Business Fin & Account

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Due to their covert and often dubious nature, corporate political activities may encourage or facilitate opportunistic behaviors. Yet, they also subject firms to heightened visibility, which brings greater public and regulatory scrutiny. Using a hand-collected data set of politically connected U.S. IPOs, we investigate how this tension shapes the financial reporting incentives of firms going public and the accompanying direct compliance costs. Consistent with the agency view of corporate political activism (CPA), politically active IPO issuers have worse financial reporting quality, more litigation risk, and eventually pay 28% more accounting fees than their peers. Additional analysis exploiting the U.S. Supreme Court's landmark ruling on Citizens United vs. Federal Election Commission suggests that the link between CPA and IPO accounting fees is likely to be causal. Finally, our evidence indicates that the involvement of specialized financial intermediaries in the political process has implications for the IPO financial reporting quality.

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Section: Discussionmentioning

confidence: 99%

Corporate political activism, information transparency and IPO compliance costs

Gounopoulos

Loukopoulos

2023

Business Fin & Account

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“…The measurement of political connections is divided into subjective and objective approaches: subjective measures include questionnaires or case interviews, which measure the closeness of political connections by designing questions on the relationship between enterprises and government departments and by using the subjective feelings of enterprise managers; objective measures tend to measure the political ties of enterprise executives. Many studies have measured political connections based on whether board members have experience in government departments or the proportion of executives with a political background [ 18 , 25 , 33 ]. In addition, several studies have measured political connections through several corporate financial or corporate governance indicators.…”

Section: Methodsmentioning

confidence: 99%

“…Thus, they tend to provide credit channels with longer maturities and lower or more favorable interest rates. In addition, political connections bring many special subsidies or tax breaks to affiliated enterprises [ 16 , 18 ], directly providing the funds needed for DT.…”

Section: Literature Review and Theoretical Analysismentioning

confidence: 99%

“…First, we complement the research on the impact of political connections on corporate DT. Currently, an increasing number of papers are discussing on the impact of political connections on firm performance and behavior, such as political connections on financing [ 14 , 16 , 17 ], tax breaks [ 5 , 18 ], investments [ 19 ], mergers and acquisitions (M&A) [ 20 ], and other behaviors. Only a few studies have linked political connections and firms’ DT.…”

Section: Introductionmentioning

confidence: 99%

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Do political connections facilitate or inhibit firms’ digital transformation? Evidence from China’s A-share private listed companies

Jin,

Li,

Shi

et al. 2024

PLoS ONE

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Given the advent of the digital era, digital transformation has become necessary for enterprise development. Political connections are the most important resources for enterprise development in most countries. However, the impact of political connections on corporate digital transformation has yet to be verified. This study uses ERNIE, a large language model, to construct a measurement of corporate digital transformation from the perspective of digital technology application through a textual analysis of the annual reports of A-share privately listed companies from 2008 to 2020 and analyzes the impact of political connections on corporate digital transformation and its mechanism of action. The findings demonstrate that political connections have a significant inhibitory effect on corporate digital transformation. This conclusion still holds after a series of robustness and endogeneity tests. The mechanism analyses demonstrate that political connections primarily affect corporate digital transformation through three mechanisms: weakening risk, inhibiting innovation, and enhancing resource crowding. We theoretically expand the understanding of the economic impact of political connections and provide new ideas for accelerating enterprise digital transformation from the perspective of policy makers.

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“…Based on the motive to finance investment, firms probably use equity financing to raise external capital, thereby easing financial constraints. On the other hand, firms' political influence contributes to seasoned equity offerings (Nnadi et al, 2021; Zhou & Yang, 2022). In China, listed firms must be approved by government sectors before conducting seasoned equity offerings.…”

Section: Further Analysismentioning

confidence: 99%

Financial constraints and political catering disclosures of non‐state‐owned firms: Evidence from textual analysis

Kong

Shi

2023

Accounting & Finance

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Using textual analysis techniques, we construct a novel measure to quantify the level of political information in forward‐looking disclosures of privately controlled firms. Our results show that private firms with serious financial constraints are more likely to reveal more political information in forward‐looking disclosures. Plausible mechanisms driving our findings are firms' high growth, under‐investment, and weaker political connections, suggesting that firms cater to governments in the expectation of more financing resources. Finally, we show the economic consequences of political catering strategy on corporate performance.

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Political connections and seasoned equity offerings

Cited by 9 publications

References 105 publications

Corporate political activism, information transparency and IPO compliance costs

Corporate political activism, information transparency and IPO compliance costs

Do political connections facilitate or inhibit firms’ digital transformation? Evidence from China’s A-share private listed companies

Financial constraints and political catering disclosures of non‐state‐owned firms: Evidence from textual analysis

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