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 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.

Bibliographic Details

Main Authors:	Liu, Tingting, Ullah, Barkat, Wei, Zuobao, Xu, Lixin Colin
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2015-05
Subjects:	GROWTH RATES, LINE OF CREDIT, DEPOSIT, LINES OF CREDIT, COMPETITORS, RED TAPE, INSTITUTIONAL ENVIRONMENT, FINANCIAL MARKET DEVELOPMENT, FINANCING, INFORMAL SECTOR, COUNTRY FIXED EFFECTS, INCOME, FOREIGN OWNERSHIP, CONSUMER PRICE INDICES, PRIVATIZATION, GOVERNMENT, PROPERTY RIGHTS, EXCHANGE, LIQUIDITY, DEVELOPING COUNTRIES, TAX COLLECTION, POLITICAL ECONOMY, CAPITAL STRUCTURE, WORLD DEVELOPMENT INDICATORS, COMPANIES, FINANCIAL STATEMENTS, INFORMATION SHARING, LOAN, FINANCIAL STATEMENT, FIRM SIZE, PRICE, TAX, CORRUPTION, INVESTMENT OPPORTUNITY, DISCLOSURE, INDEPENDENCE, BANK LENDING, EXTERNAL FINANCE, SMALL BUSINESS, STATES, FUTURE PROSPECTS, STATE OWNERSHIP, CREDIT RATINGS, LEGAL CONSTRAINTS, CURRENCY, INITIAL PUBLIC OFFERINGS, MARKET DEVELOPMENT, FINANCIAL INSTITUTION, REAL GROWTH RATE, FOREIGN COMPANY, FINANCIAL OBSTACLES, CORPORATE FINANCE, MARKETS, FIRM, GOVERNANCE INDICATORS, LENDERS, PRIVATE SECTOR DEVELOPMENT, ECONOMIC REFORMS, LICENSING, ENTERPRISES, TAX COLLECTIONS, AGENCY COSTS, CAPITAL INVESTMENTS, FINANCIAL HEALTH, TAXES, INFORMATION ASYMMETRY, INVESTMENT DECISIONS, EXPENDITURE, CLIENT, FISCAL, INVESTORS, FIRMS, INDIVIDUAL FIRM, ECONOMIC PERFORMANCE, BUSINESS ENVIRONMENTS, OWNERSHIP STRUCTURE, TRANSPARENCY, STATE GOVERNMENT, FINANCIAL CRISIS, STARTUPS, PARTIES, FUTURE, REPUTATION, COUNTRY DUMMY, STATE-OWNED ENTERPRISES, UNDERDEVELOPED MARKETS, ENTERPRISE, FIRM PERFORMANCE, TAX RATES, MARKET, LOCAL CURRENCY, GOVERNMENT EXPROPRIATION, COMPANY, REGULATION, FINANCIAL OBSTACLE, DIVERSIFICATION, CITIZENS, GOVERNANCE, EXPOSURE, INSURANCE, SOCIAL CAPITAL, TAXATION, MANUFACTURING INDUSTRIES, ECONOMIC DEVELOPMENT, STATE, INVESTOR, GOVERNMENT OWNERSHIP, FIXED ASSETS, SECURITY, FINANCIAL DEVELOPMENT, LEGAL SYSTEM, FINANCIAL MARKET, GROWTH RATE, INVESTMENT, FINANCIAL INTERMEDIATION, SHARE, INVESTOR PROTECTION, GOVERNANCE INDICES, FINANCIAL INFORMATION, SALES GROWTH, BUSINESS ENVIRONMENT, BANKING, BUSINESS LICENSING, INSTITUTIONAL DEVELOPMENT, FOREIGN COMPANIES, LAW, INVESTMENTS, EXTERNAL FINANCING, CORPORATE DISCLOSURES, SMALL FIRMS, POOR GOVERNANCE, AUDIT, CUSTOMERS, SUPPLIERS, FIRM GROWTH, STRONG GOVERNANCE, CAPITAL INVESTMENT, GOVERNMENTS, BUSINESS PERFORMANCE, SEE, FINANCIAL CONSTRAINTS, POLITICAL INSTABILITY, PRICES, COST OF CAPITAL, COMPETITION, CORPORATE GOVERNANCE,
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
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