Financial Reporting, Growth and Productivity: Theory and International Evidence

45 Pages Posted: 2 Feb 2005  

Gil Sadka

University of Texas at Dallas

Date Written: December 2004

Abstract

This paper investigates the relation between financial reporting, total factor productivity (TFP) and economic growth. The paper develops the theory that public sharing of financial reports (market transparency) and other associated sources of information such as analyst reports, can help firms learn from their competitors and improve their production process and firm organization. The model illustrates that, up to a point, financial reporting directly increases TFP and GDP growth. Employing data from 30 countries over the period of 1985-1999, the paper provides empirical evidence consistent with this hypothesis. However, the theory suggests that excessive transparency might reduce incentives for undertaking profitable and socially beneficial investments.

Keywords: Financial development, economic growth, legal system

JEL Classification: O16, O40, G28, M41, G29

Suggested Citation

Sadka, Gil, Financial Reporting, Growth and Productivity: Theory and International Evidence (December 2004). Available at SSRN: https://ssrn.com/abstract=652301 or http://dx.doi.org/10.2139/ssrn.652301

Gil Sadka (Contact Author)

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

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