Financial Reporting Quality and Economic Growth
University of Michigan at Ann Arbor - Stephen M. Ross School of Business
Massachusetts Institute of Technology (MIT) - Sloan School of Management
May 10, 2010
We investigate whether financial reporting quality facilitates economic growth. Our hypothesis is that better reporting quality improves project identification and selection, and lowers the cost of capital, translating into faster growth. Based on the premise that information uncertainty exacerbates decision making difficulty and agency problems, and that reporting quality mitigates these problems, we predict and find that high information uncertainty industries grow disproportionately faster in countries with better reporting quality. Specifically, we find that high information uncertainty industries grow between 0.12% and 0.22% faster in countries with high reporting quality. Additional evidence using International Financial Reporting Standards (IFRS) as an exogenous shock to reporting quality supports our hypothesis.
Number of Pages in PDF File: 61
Keywords: Financial reporting quality, corporate transparency, transparency, earnings quality, information uncertainty, IFRS, information asymmetry, economic growth
JEL Classification: O40, F30, D82, G15, M41, M43, M47working papers series
Date posted: September 11, 2008 ; Last revised: June 24, 2010
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo8 in 0.422 seconds