Political Information Disclosure Of Private Firms On The Basis Of Textual Analysis: Measurements,Mechanisms And Influences

Recently,private economy is becoming indispensable power to promote the economic and social development in China.Private firms not only play an important role in economy,but also have social and political influence in China.Moreover,the government actively encourage,support and guide private firms to engage in important fields related to national economy and the people's livelihood,thereby maximizing the important effect of private firm on economic development and social people's livelihood.Against this background,government-business relation will happen a whole new change.Government-business relation is the moet important economic and social relation in China,which is important factors for understanding the fast development of China's economy.Thus the rapid growing literature focus on the relationship between government and firms.Prior studies mainly investigate firms' political connection and relation from micro-enterprise level.Based on the managers' personal characteristic and political network,a large number of literature study the corporate performance of political connected firms.However,with the deepening government-business cooperation,private firms more and more engage in politics,thereby presenting multidimensional communication and interaction between government and private firms.The method and measurement in prior literature may be incomplete to describe the big picture about government-business relation and firms' political connections.Hence,by employing textual analysis techniques,this paper identifies political content from business strategic planning document in the context of China,thereby constructing a political similarity measure of private controlled firms,eventually investigating the political mechanisms,and the effect of political information disclosure.Firstly,using textual analysis techniques,this paper extract forward-looking disclosures from annual reports,and construct a novel measure to capture the political similarity of private controlled firms,which refers to the political content of forwardlooking disclosures in annual reports.And the research construct different textual political similarity index by employing various textual analysis tools,including Cosine similarity,and Jaccard similarity,and Word2 vec model.Connecting with advantages and disadvantages of all similairy index,This paper validate our firms' political similarity measures by comparing real political environment in China and analyzing different dimensional political similarity among different industries,thereby verifying the effectiveness of measures.These results show that textual political similarity calculated by cosine similarity model is more valid to reflect the political feature of private controlled firms.The test about exploring the best political similarity lays the foundation for followup study.Secondly,on the basis of constructing textual political similarity,this paper investigates private controlled firms' mechanisms of political information disclosures from the points of financial constraints.The results show that due to the political capital and relationship that contributes firms to have access to financing resoures,private firm with the serious financial constraints,are expected to have stronger incentive to bond with government by engaging in political activities or catering for the trend of policy claims,thus leading to present the higher political similarity in forward-looking disclosures.Moreover,our findings are particularly pronounced in firm with high growth,under-investment,and issued seasoned equity offering.Thirdly,from the view of government subsidies,this paper investigates whether and,if so,how political information disclosure affect the access to capital.These results show that firms with annual reports containing more political information in forward-looking statements receive more subsides from governments.Moreover,this effect is more prominent in firms with greater demands for political networks and serious financial constraints.Further evidence indicates that political information disclosure of private controlling firms only have influence on government subsidies,rather than bank loans.Finally,this paper investigates the influence of firms' political information disclosure strategy based on the investment efficiency.Empirical results show that firms with containing more political information in forward-looking statements are more likely to improve future investment efficiency.Moreover,political information disclosure can help firm to obtain more subsidies from government,thereby improve future investment efficiency by easing financial constraints.Further evidence indicates that the the external governance mechanism from analysts and institutional investors contribute to the positive effects of political information disclosure on investment efficiency.To sum up,the research of this paper is exploratory and novel.By employing textual analysis techniques,this paper construct a novel measure to capture the political similarity of private controlled firms,and provide the new perspective for researchers to study the relationship with firms and governments.Moreover,the research complements the emerging but growing literature about the firms' political strategy by systematically investigating the private firms' political mechanisms and the effect of political information disclosure on firms' financing and investment.Based on the impact of firm' political mechanisms on information disclosures,the research of this paper provide a new regulatory direction for China Securities Regulatory Commission(CSRC),which monitors the information disclosure of the listed firms by checking the language characteristics of corporate information.It has clear policy implications for regulators to strengthen the supervision firms' information disclosures.Overall,the conclusions in this paper are valuable and instructive for the allocation of government subsidies,firms' financing strategy and firms' investment decision-making.