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

Abstract

AbstractUsing 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.