Firms supply accounting conservatism in response to debt/equity contracting, litigation, political costs, and taxation demand from stakeholders. I examine whether political connections between U.S. firms and politicians moderate and/or intensify the impact of these demands on the supply of conditional and unconditional conservatism. I measure political connections based on the association between firms' campaign contributions and equity ownership in firms by U.S. House and Senate representatives. I measure conditional conservatism using an earnings-return model and unconditional conservatism using a persistent negative accruals proxy. I find that political connections moderate the effect of the debt contracting (litigation) demand for conditional (unconditional) conservatism. My results demonstrate whether and how political connections of U.S. firms can affect the four demands for and the supply of the two forms of conservatism. The collective evidence suggests that political connections serve as an alternative channel to reduce stakeholders' debt contracting and litigation demand for accounting conservatism.

The media can impose reputational costs on firms because of its important role as an information intermediary and its ability to negatively slant coverage. We exploit a quasi-natural experiment that holds constant the information event across firms but varies the availability of a major news outlet in local markets. We find that firms subject to the threat of slanted coverage suppress the release of negative information before the event and release it subsequently. Our results are consistent with theory on the active role firms can play in managing their reputational capital through anticipatory actions to avoid negative media coverage.

We evaluate the net costs and benefits of the whistleblower ( WB ) provisions adopted under the Dodd‐Frank Reform Act of 2010 by examining investor responses to events related to the proposed regulations. We focus our main analysis on a sample of firms that lobbied against implementation of the WB provisions by submitting a comment letter to the SEC . Lobbying firms are characterized by weaker existing WB programs and greater degrees of managerial entrenchment than a matched control sample of similar non‐lobbying firms. Short‐window excess stock returns around events related to implementation of the WB rules are significantly more positive for the portfolio of lobbying firms than for their matched controls; this effect is also more pronounced for lobbying firms with weaker existing WB programs. These results suggest that investors expect the new WB provisions to provide net benefits by improving shareholder protection.

Demand for disclosures on environmental, social, and governance (ESG) issues has increased dramatically. Using corporate political spending disclosures as our setting, we conduct a detailed inquiry of 541 political spending‐related shareholder proposals from 2004 to 2012 to highlight the role of shareholder activism as a mechanism to motivate ESG disclosure. Unlike earlier studies, we examine both proposals that went to a vote and proposals that were withdrawn by the activist, allowing us to assess more comprehensively the success of shareholder activism. We find that 20 percent of firms targeted by disclosure proposals begin disclosing in the subsequent year, although implementation rates vary by proposal type—8 percent for proposals subject to a vote versus 56 percent for proposals withdrawn. The sponsor is also important: unions and public pension funds are less likely than other activists to target firms with agency problems and are less successful in having proposals withdrawn, and the implementations they obtain are viewed more negatively by the broader investor base. Our findings highlight shareholder proposals as one mechanism through which investors can successfully express their preferences for corporate disclosure policies. Given activists' long‐standing interest in environmental and social disclosure policies, we believe our findings generalize to a broader set of ESG disclosures.

We examine whether the media can act as a friction that hampers the efficiency of corporate labor investment, a decision that attracts significant media attention. We develop a new measure of media exposure that takes into account the circulation and geographic proximity of a comprehensive set of media outlets. We show media exposure leads to greater labor investment inefficiency. Closer examination reveals that media exposure is associated with firms underhiring, but not underfiring. This underinvestment in labor by managers helps avoid future layoffs but is inefficient in that firms are left understaffed relative to their economic fundamentals. Further, we find that managers’ concerns about their personal reputation, but not the firm’s reputation, primarily drive our results. Our findings illustrate that the media can serve as a friction for, in addition to being a facilitator or monitor of, corporate labor investment decisions. Data Availability: All data are available from public sources identified in the paper.