Corporate public transparency on financial performance: The moderating role of political embeddedness

Abstract

Corporate public transparency (CPT) is instrumental for companies to establish communications and trust with the public by disclosing and communicating information concerning corporate environmental and social impacts. However, it is still in dispute whether CPT can help promote corporate financial performance (CFP). This paper studied the moderating role of political embeddedness on the relationship between CPT and CFP. We investigate multiple hypotheses about the moderating roles of the political embeddedness including bureaucratic embeddedness (political connections of a chief executive officer (CEO) who was/is a government official or member of political council) and ownership embeddedness (i.e., state-owned enterprises (SOEs)). With the data of 195 observations from top 200 Chinese enterprises ranked by revenue for the years 2014~2016, the results show the following: (1) the relationship of CPT on CFP is moderated by government official and SOE ownership; (2) a negative moderating effect of government official; and (3) a negative moderating effect of SOE ownership. The research implications are further discussed. The findings of this study have practical implications for investors, stakeholders, and regulators.