Financial Reporting, Growth and Productivity: Theory and International Evidence
University of Texas at Dallas
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.
Number of Pages in PDF File: 45
Keywords: Financial development, economic growth, legal system
JEL Classification: O16, O40, G28, M41, G29
Date posted: February 2, 2005