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The purpose of this paper is to examine the effects of political connections surrounding an exogenous Supreme Court decision (Citizens United) that lifted long-standing restrictions on corporate political contributions.

This study examines key characteristics of politically connected firms compared to non-politically connected firms, including their market reaction to Citizens United, as well as cash holdings levels and governance characteristics before vs after the landmark decision.

The results indicate a significant negative market reaction to politically connected firms surrounding the announcement of Citizens United. Additionally, there is a significant increase in the cash holdings of politically connected firms relative to before the event and relative to non-politically connected firms. For politically connected firms, this result is exacerbated by poor corporate governance quality. Collectively, these findings are consistent with a positive association between agency costs and political connections.

This study provides novel evidence by exploiting an exogenous enhancement in the implications of political connections that accompanied the Citizens United decision. The use of this quasi-natural experiment offers an ideal research setting to extract fresh insights into the effects of corporate political connections.

The paper investigates whether political geography, as measured by the degree of alignment of state politicians with the party of the USA President, has an impact on corporate fraud convictions.

Prior research shows that the degree of alignment between state politicians and the president's political party is positively correlated with measures of earnings management for firms headquartered in the state. Political alignment is conducive to earnings management because it affects a firm's information and enforcement environment by increasing policy risk and promoting lenient regulatory oversight. The paper posits that this environment is also conducive to corporate fraud and tests this hypothesis using pooled ordinary least squares (OLS) and panel regressions with annual state-level data for 2003–2018.

The paper documents a positive and statistically significant relationship between political alignment and corporate fraud conviction rates by state.

The conclusions are tempered by data limitations. First, the conviction data are available at the state level only. Second, the true level of fraud is inherently unobservable and the conviction data may not reflect the actual number of frauds that are committed.

Fraud examiners might benefit from considering the role of political connectedness in determining fraud risk. Although additional research is needed before making concrete recommendations, the initial indications clearly point to political connections as a potential concern.

The findings build on evidence that political connections influence earnings management. Rather than focusing on direct measures of connectedness, such as lobbying expenditures, the paper examines a plausibly exogenous measure: political geography.

This paper investigates how different types of corporate political connection, including government-linked investment (GLI), former officials as politically-connected directors (PCD), cronyism (CRO) and government leaders' family ties (FAM), influence financial distress risk in Malaysian firms.

We separate political connections into four distinct categories and investigate their relationship with firm distress risk and compare the results with the one-size-fits-all treatment which is popular in the literature. We apply a battery of sensitivity test to ensure that our inferences are robust to a wide range of test specifications, endogeneity concern and sample selection methods.

The empirical results show that the effect of political connections on distress risk is strongly heterogeneous. GLI and PCD firms tend to have higher distress risk via increased risk-taking behaviors because of the different incentives of the connections, while this nexus does not directly exhibit in CRO and FAM firms. Further analyses reveal that CRO and FAM firms are more likely to venture into risky international diversification, thus indirectly amplifying their distress risk.

Our findings are novel and provide practical implications for financial analysts, investors and portfolio managers operating in the capital markets.

This study aims to examine the impact of home–host country distance on the cross-border mergers and acquisitions performance.

The results of this study are based on a final sample of 483 completed cross-border deals involving BRICS nation acquirers and targets spread across a set of 27 nations. While controlling for prior experience, among other factors, the impact of nine institutional distance dimensions on deal performance is examined. Cumulative abnormal returns calculated over the select event windows are used as a measure of deal performance.

The results of this study validate the explanatory power of cross-country distance and exhibit that financial and cultural distance exert a negative influence on deal performance, whereas political and global connectedness distance positively impacts performance. Interestingly, geographic distance is not found to be related to performance outcomes.

The results of this study caution against possible aggregation of the cross-country distance measure and point towards the need to acknowledge and analyse the multi-dimensional nature of distance.

The results of this study are expected to aid managers in devising internationalisation strategies and target selection, maximising their performance and shareholder wealth.

This study contributes to the knowledge of internationalisation and cross-country distance. It presents as one of the first to investigate the impact of institutional distance on deal performance using a substantially large multi-country emerging market data set.

The purpose of this paper is to link literature on China’s real estate sector and the impact of governance, ownership and political connectedness on firm financial performance. Whether these factors impact listed real estate firms differently to firms in other industry sectors is identified.

The paper uses pooled 2008-2013 data on A-share firms. Tobin’s Q captures firm financial performance. Explanatory variables include corporate governance, ownership, local government political connectedness, accounting data and ultimate control. Two-way interactions are estimated between real estate and ownership, governance, political connectedness and other variables. Three-way interactions are estimated between real estate, ownership, control and political connectedness. Year and industry fixed effects are absorbed.

Industry concentration and proportion of state ownership appear to positively impact performance. Firm size, gearing and greater foreign ownership appear to negatively impact performance. However, differences are identified for real estate firms, in which state control and gearing positively impact performance. Greater state and foreign ownership as well as supervisory board size negatively impact performance. Finally, state control in the presence of local government connections negatively impacts performance, while greater state ownership in the presence of local government connections positively impacts performance.

A lack of empirical evidence on the impact of corporate governance, ownership structures and political connectedness on firm performance in China’s real estate sector is addressed. Importantly, relationships among these factors and the financial performance of China’s listed real estate firms differ to those of firms in other industries.

This paper aims to examine the role of local/provincial government in influencing corporate social and environmental reporting (CSER) in China, and more specifically, how the underlying economic and political factors associated with local government have influenced the quality of CSER.

The authors used 234 environmentally sensitive companies listed on the Shanghai and Shenzhen Stock Exchanges during 2013 and 2015 as the research sample to test the relationship between CSER and local government’s political connection and economic prioritisation and the potential mediating effect of local economic prioritisation.

The analysis provides evidence that local/provincial government’s political geographical connectedness with the central government has directly and positively influenced the level of CSER, while local prioritisation of economic development has a direct but negative effect on CSER in China. In addition, local/provincial prioritisation of economic development has mediated the relationship between local–central political geographical connectedness and CSER.

While local/provincial governments are heavily influenced by the coercive pressure from the central government, they also act in their own political and economic interests in overseeing CSER at the local level. This study raises the question about the effectiveness of the top-down approach to improving CSER in China and suggests that the central government may need to focus more on coordinating and harmonising different local/provincial governments’ interests to enable achieving a common sustainability goal.

The authors provide evidence revealing how the economic and political contexts of local government have played a significant role in shaping CSER in China. More specifically, this paper addresses a gap in the literature by highlighting the importance of local government oversight power for CSER development and how such oversight is determined by local prioritisation of economic development and political geographical connectedness of local and central governments.

Despite the importance and prevalence of corporate political activities in modern organizations, there remains limited insight on the potential relationship between political contributions and companies’ risk-taking activities. This study aims to examine the relationship between monetary political contributions of firms and corporate risk-taking activities in the context of unstable political and economic environments.

The authors use a two-step system GMM estimation to investigate the subject using a cross-country sample of 307 firms from 22 countries covered over 2002–2017. In line with previous studies, the authors control for various corporate governance mechanisms, firm-level factors and country-level characteristics.

The findings demonstrate that firms that make monetary political contributions exhibit lower levels of risk as measured by different proxies for risks, namely, systematic, idiosyncratic and total risk.

The results suggest that political contributions can be a useful mechanism to mitigate risk exposure. Also, the use of different risk measures and other factors for robustness fosters a better understanding of political connectedness in a more contextualized and dynamic manner.

This study seeks to contribute to the debate surrounding corporate strategy, political connectedness and corporate risk-taking by using actual monetary political contributions as an explicit measure of political connection. This study furthers scholarly understanding on the dynamics of corporate political activities using political contributions in monetary terms as a measure of political connectedness and its impact on risk-taking. Furthermore, the authors explore this topic using insights from nonmarket strategy literature and studies on political contributions.

The purpose of this paper is to verify existence of political connection of firms in India. For this purpose the paper first presents a theoretical model and then tests empirically the movement of stock prices during two state elections in India.

The methodology is theoretical modelling where the paper applies the standard Cournot model of oligopoly. The paper then applies correlation and Wilcoxon Paired Rank Sum test to verify the results of the theoretical model by using data from the Indian stock market during the election results.

The theoretical result states that some firms opt for political connection and some remain independent in an oligopoly. It also shows that political connection affects stock price. The empirical results find out that divergent responses of stock prices to the election results can be linked to politically connection.

The theoretical model is a simple two firm model and not generalized to n number of firms. The empirical test considers only two state elections and applies simple statistical test. The study is restricted to one country only.

The paper has practical implications for stock market. It has implications for corporate governance and for political governance. This is important since political connection of firms has emerged as an important issue in India.

The paper is important as it addresses the issue of political connection of firms, which have ramifications for social equilibrium. In a democratic country like India any nexus between political party and firms may adversely affect not only corporate governance but also political governance.

This paper looks at political connectedness theoretically in a federal structure, an issue not addressed so far in the literature. Second it considers not so discussed topic of market perception of political connection in India. The originality of the paper is that it presents a theory and also verifies the theoretical results with empirical test.

Audit rotation (AR) is a key policy initiative implemented in global jurisdictions to deal with concerns about audit quality. Auditing financial reports involves communicating attested value-relevant company information to investors, and hence audit quality plays a role in the quality of financial reporting information. This paper aims to investigate whether AR affects the degree of information asymmetry (IS) between investors. It further aims to examine whether voluntary AR results in less asymmetric information compared to mandatory AR. Additionally, it examines whether political connections moderate the association between AR and IS.

The authors use data from publicly traded banks across the Gulf Cooperation Council (GCC) for the period 2010–2018. The authors include several variables to control for corporate governance and other firm-specific characteristics by using country-year fixed-effects regression model.

The authors find higher IS for banks that periodically rotate auditor, while banks voluntarily choose to rotate auditors obtain high-quality audits, which results in higher trading volume and lower stock return volatility, hence lower IS. The results suggest that when banks voluntarily choose to rotate auditors, investors perceive these banks as more committed to obtaining high-quality audits relative to mandatory AR. Providing higher quality audits enhances the credibility of reported information and thus reduce the level of IS. Moreover, IS following AR is higher for politically connected banks than for similar but politically unconnected banks. Finally, investors perceive voluntary AR as a disciplining tool, which mitigates IS. This mitigating role is not affected by bank political connectedness.

This study has limitations as the definition of AR could be interpreted as binary or too narrow, and hence it may not be appropriate to generalize findings to different contexts. Nonetheless, this study casts light on a new perspective to reconcile the existing mixed evidence on the influence of AR on IS and the moderating role of political connections. A further limitation is that because of data unavailability, the authors were unable to use other proxies (e.g. bid-ask spreads and analyst forecast dispersion) of IS.

The present findings provide insight to regulators, policymakers and standard setters on the potential adverse effect of political connections on the role of AR in mitigating IS. The results underscore the importance of voluntary AR, and suggest that regulators, policymakers and standard setters encourage firms to rotate their auditors periodically.

This study provides evidence in a setting that is unique at the economic, social and regulatory levels. Prior literature is lacking and has been centered on developed countries or focusing on single-country specifications. The data set of this study is unique and allows us to examine the interplay between political influence that arises through ownership and management roles of influential members of state.

In response to the growing significance of diversity advertising, this study aims to investigate its impact on audience connectedness. This is an emerging metric crucial for gauging diversity advertising success. The study explores two paths via self-identification and belief congruence to understand how diversity advertisements resonate with individuals.

A quantitative study using partial least squares with survey data from 505 respondents was conducted.

Self-identification and belief congruence mediate the relationship between perceived diversity and audience connectedness. Belief congruence exhibits a stronger influence. Further, brand engagement reduces the relationship between belief congruence and connectedness. However, it strengthens the relationship between self-identity and connectedness.

Future research should address why belief congruence holds more significance than self-identification. Additionally, research must explore the societal effects of diversity advertising, including strategies to engage those who feel disconnected.

The study underscores the positive social effects of diversity advertising for both marginalized and nonmarginalized audiences. It urges marketers to pursue audience connectedness. Strategies for achieving this include reflecting their target audience’s beliefs, perhaps highlighting real and lived experiences. Marketers should also consider self-identification through visual cues and customized messaging.

The study applies self-referencing theory to unravel the relationship between diversity advertising and audience connectedness. It reinforces the role of self-identification and expands the knowledge by demonstrating how connectedness can emerge through belief congruence. Additionally, the authors explore the subtle influence of brand engagement, a critical brand-related factor that shapes individuals’ responses to diversity advertising.