Political connections and voluntary disclosure: the case of Canadian listed companies

Business and politics are now more connected than ever. In Canada, more than 50% of listed companies have political connections through the board of directors or top management. These ties can give companies the resources they need to achieve their goals and possibly even confer a substantial advantage that results in better financial performance. To this end, political connections must influence the various choices and behaviours of politically connected companies, such as their voluntary disclosure strategy. As this type of influence has rarely been investigated in the literature, the current study looks at the impact of board and top management political connections on the voluntary disclosure behaviour of Canadian firms. Four types of voluntary disclosure-environmental, social, governance and total-are analyzed. Results show that politically connected companies make broader voluntary disclosures than non-connected firms do. Board and top management political connections are positively and significantly related to total voluntary disclosure, and board political connections are positively and significantly related to governance disclosures. In addition, top management political connections are positively and significantly related to voluntary environmental and social disclosures. This study is the first to shed light on the link between political connections and the voluntary disclosure of Canadian listed companies, as well as the first to confirm that not all political connections are equal. The impact of these connections on companies' choices and behaviours can differs according to the politically connected actor's position in the company, including on the board of directors or in top management. This difference could be explained by the fact that while board are generally concerned about strategic issues, top management deal with operational aspects. Consequently, they may not have the same behaviours and choices.