The Dark Side of Disclosure : Evidence of Government Expropriation from Worldwide Firms
This paper studies the effects of voluntary accounting information disclosure through auditing on firm access to finance, exposure to corruption, and sales growth. Relying on a data set of more than 70,000 firms in 121 countries, the analysis finds...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2015
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2015/05/24440274/dark-side-disclosure-evidence-government-expropriation-worldwide-firms http://hdl.handle.net/10986/21989 |
| Summary: | This paper studies the effects of
voluntary accounting information disclosure through auditing
on firm access to finance, exposure to corruption, and sales
growth. Relying on a data set of more than 70,000 firms in
121 countries, the analysis finds that disclosure can be a
double-edged sword. On the one hand, audited firms exhibit a
slightly lower level of financial constraints than unaudited
firms. On the other hand, audited firms face a significantly
higher level of corruption obstacles. The net effects of
voluntary information disclosure on firm growth are
negative, which can largely be explained by the fact that
most of the countries in the sample are developing countries
where institutions are weak. The beneficial effect of
disclosure increases as a country’s property rights
protection improves. The qualitative results are robust to
considerations of the endogeneity of auditing and to
alternative measures of corruption and financial
constraints. The findings reveal the dark side of voluntary
information disclosure: exposing firms to government
expropriation where institutions are weak. |
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