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Global convergence of financial reporting and resilience to fiscal spillover shocks

Zhong, Rong (Irene)

Journal of International Financial Markets, Institutions and Money, 2025, vol. 99, issue C

Abstract: In today’s interconnected global economy, economic shocks in one country often propagate across borders, causing significant fluctuations worldwide. Constructing a novel country-to-country multiplex network framework, this study demonstrates that financial reporting convergence enhances a country’s resilience to spillover shocks, resulting in a 16.12% and 23.30% decrease in the sensitivity of employment and value-added to shock-induced fluctuations. This resilience effect arises from network diversification, enabling countries to allocate resources more strategically across a broader range of foreign partners. Our findings are robust to multiple identification strategies. Overall, our study underscores the importance of global financial reporting convergence in reducing network risk and strengthening countries’ economic stability in the face of external shocks.

Keywords: Globalization; Network externality; Fiscal policy; Shock transmission; Risk diversification; Financial reporting harmonization (search for similar items in EconPapers)
JEL-codes: F00 F40 G10 M40 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:99:y:2025:i:c:s1042443124001768

DOI: 10.1016/j.intfin.2024.102110

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Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

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