Financial constraints and political catering disclosures of non-state-owned firms: Evidence from textual analysis

Using textual analysis techniques, we construct a novel measure to quantify the level of political information in forward-looking disclosures of privately controlled firms. Our results show that private firms with serious financial constraints are more likely to reveal more political information in forward-looking disclosures. Plausible mechanisms driving our findings are firms' high growth, under-investment, and weaker political connections, suggesting that firms cater to governments in the expectation of more financing resources. Finally, we show the economic consequences of political catering strategy on corporate performance.