Firm partisan positioning, polarization, and risk communication: Examining voluntary disclosures on COVID-19

The COVID-19 pandemic will rank among the greatest challenges many executives will have faced and not only due to the operational challenges it posed. Upon entering the U.S. context, the disease was immediately politically polarized, with clear partisan splits forming in risk perceptions of the disease unrelated to science. We exploit this context to examine whether firms' partisan positioning affects whether and how they communicate risk to their investors on a polarized public policy issue. To do so, we examine the covariation between firms' disclosure of COVID-19 risks and the partisanship of their political giving. Our analysis of earnings call and campaign contribution data for the S&P 500 reveals a positive association between a firm's contributions to Democrats and its disclosure of COVID-19 risks.

From its onset in the United States, attitudes toward and discourse around the COVID-19 pandemic was heavily politicized and perceptions of the disease's risks were seen as more serious by Democratic-identifying individuals than Republican identifiers. In this study, we examine whether this pattern also holds for U.S. publicly traded firms, who can also stake out a political position through their corporate political action committee campaign contributions. In analyses of earnings call transcripts from the first quarter of 2020, we show that the more Republican-leaning (Democrat-leaning) a firm's campaign contributions are, the less (more) likely it was to voluntarily disclose risks related to COVID-19. We argue that these findings hold implications for parties interested in interpreting firm's risk disclosures on politically polarized issues.