Property rights protection, corporate transparency, and growth

Art Durnev, Vihang Errunza and Alexander Molchanov
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Art Durnev: Desautels Faculty of Management, McGill University, Montreal, Canada
Vihang Errunza: Desautels Faculty of Management, McGill University, Montreal, Canada
Alexander Molchanov: Department of Economics and Finance, Massey University, Auckland, New Zealand

Journal of International Business Studies, 2009, vol. 40, issue 9, 1533-1562

Abstract: In countries with secure property rights, corporate transparency improves investment efficiency and increases growth by alleviating information asymmetry. However, in countries with insecure property rights, greater transparency can increase the risk of government expropriation. Therefore some firms that would benefit most from transparency cannot take full advantage of it, as they set sub-optimal transparency levels. Using data from 59 industries in 69 countries, we find that in countries with weak property rights protection, industries that would benefit the most from transparency exhibit worse investment efficiency and grow more slowly than industries that can efficiently operate at minimal levels of transparency.

Date: 2009
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