Voluntary disclosure about public spending and the cost of public debt

Event Date: 17 March 2021

Speaker: Prof Yannis Tsalavoutas (University of Glasgow)

Time: 1pm

Abstract

Utilizing a measure of voluntary political spending disclosure that became available in 2012 and a large dataset on US firms’ actual political spending, manually extracted from different filings, we examine the effect of political spending disclosure on the cost of public debt. We contribute to the literature by showing that firms with higher levels of political spending disclosure bear a lower cost of public debt. Thus, the benefits of political spending disclosure appear to outweigh any potential proprietary costs. Moreover, we find that the channel through which political spending disclosures reduce the cost of debt relates to the reduction in information risk associated with the amount of observable political spending.

Published: 7 April 2021