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Corporate Transparency and Inter-Industry Growth Rates and Asset Allocation
Jere R Francis,
University of Missouri - Columbia
Inder K. Khurana, University of Missouri - Columbia
Raynolde Pereira, University of Missouri - Columbia
Shawn Huang, University of Missouri - Columbia
ABSTRACT. This paper examines the role of corporate transparency on inter-industry resource allocations. Our empirical tests are based on the premise that corporate transparency contributes to more efficient allocation of resources by enabling firms to better exploit industry-specific growth opportunities. Based on a cross-country study of 37 countries and 37 manufacturing industries, we find the correlations in industry growth rates across country pairs are higher when there is greater corporate transparency, 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. Third, we find both the endogenous and the residual transparency components are associated with industry-specific growth rates. Our analysis thus provides evidence that corporate transparency plays an important role in the allocation of resources across industry sectors.
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