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Political costs and strategic corporate communication

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  • Cuny, Christine
  • Kim, Jungbae
  • Mehta, Mihir N.

Abstract

When subject to public scrutiny, do firms strategically use advertising to reduce expected political costs? Advertising can ease public concerns, thereby reducing the pressure on politicians to act harshly against scrutinized firms and their industries. We use repeated congressional testimony by industry members as a novel way to identify political scrutiny. Our central finding is that scrutinized industries increase their advertising spending 132 percent more in the electorates of politicians overseeing the hearings than in the electorates of other politicians. Further, strategic advertising is complementary to income-decreasing accounting choices and a substitute for lobbying. Overall, our study sheds light on a previously undocumented mechanism through which firms attempt to manage expected political costs.

Suggested Citation

  • Cuny, Christine & Kim, Jungbae & Mehta, Mihir N., 2026. "Political costs and strategic corporate communication," Journal of Accounting and Economics, Elsevier, vol. 81(3).
    • Handle: RePEc:eee:jaecon:v:81:y:2026:i:3:s0165410126000030
    DOI: 10.1016/j.jacceco.2026.101860
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    Keywords

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • M38 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Government Policy and Regulation
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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