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What Determines Corporate Transparency?

Journal of Accounting Research 2004 , 42 (2)

53 Pages Posted: 30 Aug 2003 Last revised: 7 Sep 2017

Robert M. Bushman

University of North Carolina Kenan-Flagler Business School

Joseph D. Piotroski

Stanford Graduate School of Business

Abbie J. Smith

University of Chicago - Booth School of Business

Date Written: December 1, 2003

Abstract

We investigate corporate transparency, defined as the availability of firm-specific information to those outside publicly traded firms. We conceptualize corporate transparency within a country as output from a multi-faceted system whose components collectively produce, gather, validate and disseminate information. We factor analyze a range of measures capturing countries’ firm-specific information environments, isolating two distinct factors. The first factor, interpreted as financial transparency, captures the intensity and timeliness of financial disclosures, and their interpretation and dissemination by analysts and the media. The second factor, interpreted as governance transparency, captures the intensity of governance disclosures used by outside investors to hold officers and directors accountable. We investigate whether these factors vary with countries’ legal/judicial regimes and political economies. Our main multivariate result is that the governance transparency factor is primarily related to a country’s legal/judicial regime, while the financial transparency factor is primarily related to political economy.

Keywords: corporate transparency, international accounting, corporate governance, disclosure, law, political economy

JEL Classification: G15, G34, K22, M41, M45, M47

Suggested Citation

Bushman, Robert M. and Piotroski, Joseph D. and Smith, Abbie J., What Determines Corporate Transparency? (December 1, 2003). Journal of Accounting Research 2004 , 42 (2). Available at SSRN: https://ssrn.com/abstract=428601 or http://dx.doi.org/10.2139/ssrn.428601

Robert M. Bushman

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-9809 (Phone)

HOME PAGE: http://public.kenan-flagler.unc.edu/faculty/bushmanr/

Joseph D. Piotroski (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Abbie J. Smith

University of Chicago - Booth School of Business ( email )

1101 East 58th Street
Graduate School of Business
Chicago, IL 60637-1561
United States
773-702-7295 (Phone)
773-702-0458 (Fax)

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