Paper Title
Political Connections and Financial Report Quality

Abstract
This paper investigates the effect of political connections on the association between family firm and accounting conservatism. Family firms have incentives to reduce agency and litigation-related costs by means of conservative reporting. Firms with political connections are likely to have opaque financial reporting, which enable them to engage in rent-seeking activities. In addition, minority shareholders perceive potential expropriation risk can take price protection to press firms to adopt conservative reporting. Using data for Taiwanese listed firms between 1996 and 2012, we find that political connections weaken the positive association between family ownership and conservative financial reporting. This suggests that politically connected family firms make fewer demands for conservatism. This study contributes the literature on how political connections affect the family owners’ reporting incentives. Policy makers may consider political connections as an essential factor with respect to establishing governance practice in family firm. Keywords - Accounting Conservatism; Corporate Governance; Family Control; Political Connections