Voluntary disclosures: Three empirical studies in corporate political disclosure

This thesis contributes to the field of voluntary disclosures by investigating the determinants for corporate political disclosure practices through three empirical papers. First, it investigates the impact of CEO inside debt holdings on corporate political disclosure (CPD). Second, it examines the role of promotion-based incentives among non-CEO executives on CPD level. Finally, it investigates whether and, if so, how conditional accounting conservatism influences CPD level. First, we provide evidence that inside debt holdings motivate CEOs to enhance CPD, particularly for sensitive firms' political activities. Cross-sectional analysis reveals that the effect of CEO inside debt on CPD is stronger in financially constrained firms and in firms headquartered in more corrupt states, and it is more pronounced among Democratic CEOs compared to Republican CEOs. Second, we find that promotion-based incentives act as an effective internal governance mechanism in promoting CPD. Further tests find that that the strength of this relationship depends on the likelihood of internal CEO succession, lobbying intensity, and exposure to external political risk. Finally, we find a negative association between conditional conservatism and CPD. Cross-sectional analysis reveals that the negative association is stronger in politically hedged firms and firms headquartered in more politically corrupt states. This relationship is also more pronounced when firms face greater pressure from equity investors. The results of this thesis have important policy implications. First, given the growing concerns around CPD, our findings can help compensation committees to consider mandating the inclusion of inside debt holdings as a critical component of CEO pay structures to keep corporate political activities under investors' radar. Furthermore, executive compensation oversight should extend beyond CEO total pay to include internal pay dispersion such promotion-based pay gaps within top management team, can positively influence voluntary CPD by aligning executives' career motivations with disclosure expectations. Finally, policymakers might consider mechanisms that empower investor engagement, such as disclosure votes or enhanced shareholder rights, as tools to counterbalance the opacity created by conservative accounting.