Voluntary disclosure of corporate political spending

Ownership structure and political spending disclosure

“…First, it adds to the debate on PSD, which is an emerging and topical disclosure practice by investigating the influence of ownership structure in driving firm's political transparency. Second, this study extends the drivers of corporate political reporting, beyond those already identified in the literature such as political connections, political donations and institutional investors (Goh et al, 2020), gender diversity (Deboskey et al, 2018b), shareholder activism (Adegbite et al, 2012;Baloria et al, 2019), CEO political preference (Cohen et al, 2019), corporate community involvement disclosures (Yekini et al, 2017) and corporate presence on social media platforms (Lei et al, 2019). Third, while prior studies examined the influence of ownership structure on corporate disclosure policy, evidence on the analysis of mechanisms that influence the ownership structure-PSD association is rare.…”

“…Moreover, it is important for policy makers to capture the role of ownership identity as a monitoring mechanism in corporate PSD policy. Recently, shareholder proposals on PSD are among the most frequently submitted proposals (Baloria et al, 2019) to the US Securities and Exchange Commission (SEC) and have become the most commented proposals in the SEC's history, with approximately 1.2 million comment letters (Goh et al, 2020). Our research enquiry is timely given the significant increase in the level of PSD and its attendant regulatory implications.…”

“…1 Corporate PSD is a voluntary disclosure that informs stakeholders about a firm's utilisation of shareholders' resources towards political activities. It communicates useful, yet sensitive, information that may bring additional risk, public scrutiny and reputation cost (Goh et al, 2020). However, PSD is one of the most under-researched topics in the disclosure literature.…”

“…Also, the SEC has received substantial pressure to mandate PSD. As a result, there have been calls for more understanding of the fundamental role of ownership structure because of its strong effect on governance (Adegbite, 2010), global monitoring (Judge, 2011(Judge, , 2012 and for investigating determinants and consequences of PSD (Beets & Beets, 2019;Deboskey et al, 2018aDeboskey et al, , 2018bDeboskey & Luo, 2018;Goh et al, 2020). Using a sample of S&P 500 firms from 2015 to 2018, we explore the effects of different ownership structures on PSD.…”

“…Industry competitors may use firm's PSD to make inferences about firm's political connections and spending which can weaken firm's political position (Isidro & Marques, 2020). However, severe competition may motivate firms to exhibit more PSD to reduce information asymmetry and secure additional capital (DeBoskey et al, 2020;Goh et al, 2020). Motivated by such mixed views of industry competition, we provide evidence that institutional investors demand more PSD in the case of high industry competition (low industry concentration), suggesting that institutional owners prefer greater political transparency in investee firms operating in competitive industries to reduce information asymmetry and possibly secure external capital.…”