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Does Transparency Stifle or Facilitate Innovation?
Iowa State Univ, Ivy Coll Business, Dept Finance, Ames, IA 50011 USA..
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.). Swedish House Finance, S-11160 Stockholm, Sweden.ORCID iD: 0000-0002-9311-3914
2019 (English)In: Management science, ISSN 0025-1909, E-ISSN 1526-5501, Vol. 65, no 4, p. 1600-1623Article in journal (Refereed) Published
Abstract [en]

Corporate transparency reduces information asymmetries between firms and capital markets but increases the costs associated with information leakage to competitors. We explore how a country's information environment affects innovation, an activity characterized by high information asymmetries and potentially severe proprietary costs. Studying both long-run cross-country differences in the availability of firm-specific information to corporate outsiders, as well as quasi-experimental shocks to the information environment following transparency-enhancing security market reforms, we document significantly higher rates of R&D and patenting in richer information environments. The effects of transparency are strongest in industries that rely on external equity rather than bank debt, indicating that transparency facilitates innovation by reducing the information costs associated with arm's-length financing. In contrast, transparency has no impact on physical capital accumulation, consistent with fewer information asymmetries in tangible assets. An economy's information environment has important but heterogeneous effects on the nature and extent of real economic activity.

Place, publisher, year, edition, pages
INFORMS , 2019. Vol. 65, no 4, p. 1600-1623
Keywords [en]
corporate transparency, R&D, innovation, insider trading enforcement, European Union, IFRS, international accounting, security market regulation, disclosure
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:kth:diva-251333DOI: 10.1287/mnsc.2017.3002ISI: 000464941900009OAI: oai:DiVA.org:kth-251333DiVA, id: diva2:1317596
Note

QC 20190523

Available from: 2019-05-23 Created: 2019-05-23 Last updated: 2019-05-23Bibliographically approved

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Martinsson, Gustav

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