Are politically connected firms in Brazil worried about anti-corruption disclosure?

Abstract

PurposeDue to the mixed evidence regarding politically connected (PCON) firms and voluntary disclosure, the authors seek to investigate the direction of the association between Brazilian PCON firms and their level of information disclosed in the fight against corruption. This study is conducted in a developing country with a weak judicial system where board members or directors with political connections can operate without any oversights.Design/methodology/approachThe authors empirically test our hypothesis that voluntary anti-corruption disclosure is negatively associated with political connections. Content analysis, Wilcoxon Rank and Pearson Correlation were employed in a sample of 30 companies that belong to sectors with the highest risk of corruption, between 2014 and 2016, the period of Brazilian elections. A sample of 90 observations is used with data collected from annual reports of companies listed on the São Paulo Stock Exchange in Brazil.FindingsThe study’s results indicate a positive and significant association between the level of voluntary anti-corruption disclosure and corporate political connection, confirming our second hypothesis. PCON firms could seek to improve their legitimacy after recent corporate corruption scandals discovered in Brazil where government members participated in the schemes of bribe and money laundering and embezzlement. Although our sample is composed of firms in industries of high corruption risk, which could increase bias, the results improve the literature with empirical contribution that has given little attention to the issue.Originality/valueThe latest corruption scandals in Brazil showed that companies were involved with government officials, corruption is one of the country's biggest issues for diverting public resources to basic needs such as education and health. The relationship between political connections and voluntary disclosure is an open empirical question, particularly dealing with anti-corruption. The study’s findings bring light on the subject, which deserves greater attention not only from researchers but from the society that is most affected by corruption.