We thank the editor, Abbie Smith, and the referee for their helpful guidance, as well as the comments of workshop participants at University of California–Irvine, University of Melbourne, University of North Carolina–Chapel Hill, University of Oklahoma, and participants at the 2007 American Accounting Association annual meeting, 2008 European Accounting Association annual meeting, and the 2009 Canadian Academic Accounting Association's PhD/Jr. Faculty Consortium.
Does Corporate Transparency Contribute to Efficient Resource Allocation?
Article first published online: 14 MAY 2009
©, University of Chicago on behalf of the Accounting Research Center, 2009
Journal of Accounting Research
Volume 47, Issue 4, pages 943–989, September 2009
How to Cite
FRANCIS, J. R., HUANG, S., KHURANA, I. K. and PEREIRA, R. (2009), Does Corporate Transparency Contribute to Efficient Resource Allocation?. Journal of Accounting Research, 47: 943–989. doi: 10.1111/j.1475-679X.2009.00340.x
- Issue published online: 16 JUL 2009
- Article first published online: 14 MAY 2009
- Received 7 October 2007; accepted 4 December 2009
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.