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Political transparency, corporate governance and economic significance

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  • Jing Wang

    (California State University)

  • Huilan Zhang

    (Pennsylvania State University at Altoona)

Abstract

This study explores the rationale behind a company’s voluntary disclosure of political activity and the economic significance of political transparency and accountability. Using a unique database, the CPA-Zicklin Index ranking of S&P 500 company political activity disclosure, we investigate the role of corporate governance playing behind the increasing political transparency. The results show that corporate board functions are associated with corporate political transparency. In specific, board independence is positively related to political activity policy and disclosure. Boards with more independent directors tend to have a more transparent political activity policy and a higher level of political activity disclosure. The board monitoring intensity is negatively associated with the political activity policy. Greater monitoring intensity weakens firms’ political accountability. Greater board gender diversity has a positive impact on boards’ political transparency. Furthermore, we find that corporate political accountability has economic significance. Greater political transparency is associated with better operating performance, lower equity risk, and lower information asymmetry. In addition, political transparency is positively related to firm valuation.

Suggested Citation

  • Jing Wang & Huilan Zhang, 2022. "Political transparency, corporate governance and economic significance," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 19(1), pages 49-66, March.
    • Handle: RePEc:pal:ijodag:v:19:y:2022:i:1:d:10.1057_s41310-021-00127-z
    DOI: 10.1057/s41310-021-00127-z
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