How Do Firms Respond to Political Uncertainty? Evidence from US Gubernatorial Elections

• 成果类型: Article
• 署名作者: Bird, Andrew; Karolyi, Stephen A.; Ruchti, Thomas G.
• 署名单位: Chapman University System; Chapman University; United States Department of the Treasury; Office of the Comptroller of the Currency; Office of Financial Research; United States Department of the Treasury
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12482
• 发表日期: 2023
• 页码: 1025-1061
• 关键词: market risk disclosures; Policy Uncertainty; INVESTMENT; INFORMATION; determinants; volatility; mergers; OIL

摘要

We examine the joint response to political uncertainty along two margins: changes in real activity and voluntary disclosure. We focus on within-firm variation in exposure to ex ante competitive U.S. gubernatorial elections using data on preelection poll margins and firms' state exposures. Despite real activity falling in the years leading up to a close election, we find that voluntary disclosure increases both in frequency and content, including mentions of risk in filings that reference states holding elections. Our tests use a decomposition of 8-K filings into real activity and voluntary disclosure to address the endogenous complementarity between these two responses. These results hold when using alternative ex ante measures of political uncertainty based on term-limited incumbents, historically competitive offices, or state legislature gridlock. Both effects of political uncertainty are stronger for firms in highly regulated industries and weaker for those least exposed to the local market, linking the real activity and disclosure responses to uncertainty.