Communist party participation and corporate disclosure quality: governance effect or reputation effect?

Abstract

This study examines the association between Communist Party participation and disclosure quality. Using a sample of 13,072 firm-annual observations of A-share non-financial industry Chinese listed firms over the period 2008 to 2019. We find a positive association between Communist Party participation and corporate disclosure quality. Specifically, we find that the effect of Communist Party participation is most pronounced when the Communist Party members are also directors. Furthermore, we document that Communist Party participation can improve corporate disclosure quality rating and disclosure quality relative to the same industry. We also find evidence that the positive association between Communist Party participation and disclosure quality is more pronounced in regions with high levels of marketization. We also identify two possible channels (governance effect and reputation effect) through which Communist Party participation is likely to affect disclosure quality. Our study can provide empirical evidence of the actual effect of Communist Party participation from the perspective of disclosure quality and provide a reference for further strengthening and improving the Party’s role in enterprises.