Highly profitable but politically vulnerable firms have an incentive to make themselves appear less profitable than they really are.

Question

Quizplus · Accepted Answer

Highly profitable but politically vulnerable firms may face pressure from regulators, the public or the media to justify their profits or to otherwise address concerns about their activities. One way they may do this is by understating their profits or by engaging in practices that reduce their apparent profitability. This can serve to shield them from criticism and regulatory intervention, and may help to maintain their social legitimacy.

Highly Profitable but Politically Vulnerable Firms Have an Incentive to Make