Does Corporate Transparency Contribute to Efficient Resource Allocation?

70 Pages Posted: 16 Jun 2009

See all articles by Jere R. Francis

Jere R. Francis

affiliation not provided to SSRN

Shawn X. Huang

Arizona State University (ASU) - School of Accountancy

Inder K. Khurana

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business

Raynolde Pereira

University of Missouri at Columbia - School of Accountancy

Abstract

This paper examines whether a country's corporate transparency environment, which includes the quality of accounting information, contributes to efficient resource allocation. Based on a cross-country study of 37 manufacturing industries in 37 countries, we provide three pieces of related evidence. First, we find the contemporaneous correlations in industry growth rates across country pairs are higher when there is a greater level of corporate transparency in the country pairs, after controlling for country-level economic and financial development. Second, we find the influence of transparency on these correlations is stronger when country pairs are at similar levels of economic development (GDP). Finally, when we control for the level of transparency explained by a country's institutions in place, we find that residual transparency (unexplained by country-level factors) is associated with industry-specific growth rates. Taken together, the results are consistent with corporate transparency facilitating the allocation of resources across industry sectors.

Suggested Citation

Francis, Jere R. and Huang, Shawn X. and Khurana, Inder and Pereira, Raynolde, Does Corporate Transparency Contribute to Efficient Resource Allocation?. Journal of Accounting Research, May 2009. Available at SSRN: https://ssrn.com/abstract=1404872 or http://dx.doi.org/10.1111/j.1475-679X.2009.00340.x

Jere R. Francis (Contact Author)

affiliation not provided to SSRN

No Address Available

Shawn X. Huang

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

Inder Khurana

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business ( email )

331 Cornell Hall
Columbia, MO 65211
United States
573-882-3474 (Phone)
573-882-2437 (Fax)

Raynolde Pereira

University of Missouri at Columbia - School of Accountancy ( email )

337 Cornell Hall
Columbia, MO 65211
United States
573-882-6253 (Phone)

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