Financial Reporting Quality and International Trade

62 Pages Posted: 26 Apr 2021 Last revised: 27 Dec 2021

See all articles by Yuqing Zhou

Yuqing Zhou

University of California, Los Angeles (UCLA), Anderson School of Management, Students

Date Written: December 25, 2021

Abstract

This paper examines the effects of financial reporting quality on exports and imports. I begin by using survey data from executives to measure accounting quality and conduct country-sector-level analyses. I find that a one standard deviation increase in financial reporting quality in a country is associated with increases in manufacturing exports and imports of 3.6 percent and 4.5 percent, respectively. I then exploit a reporting regulation change in China and use administrative firm-level international trade data to conduct differences-in-differences and triple-difference analyses. These results show that treated firms export 15.3 percent more after the financial reporting reform. They also export to more countries and export more types of goods after the reform. Next, I provide evidence for potential mechanisms for these effects; specifically, improvements in financial reporting quality (i) facilitate communication among people of different cultures, (ii) decrease information asymmetry between trade partners, and (iii) help firms raise external capital. This paper extends understanding of the real economic effects of financial disclosure and provides a potential link between information transparency and global economic growth.

Keywords: Financial Reporting Quality, International Trade, Information Asymmetry

JEL Classification: G14; F65

Suggested Citation

Zhou, Yuqing, Financial Reporting Quality and International Trade (December 25, 2021). Available at SSRN: https://ssrn.com/abstract=3832915 or http://dx.doi.org/10.2139/ssrn.3832915

Yuqing Zhou (Contact Author)

University of California, Los Angeles (UCLA), Anderson School of Management, Students ( email )

Los Angeles, CA
United States

HOME PAGE: http://www.yuqingzhou.com/

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