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Globalization, transparency and economic growth: The vulnerability of Chinese firms to macroeconomic shocks

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  • Oxelheim, Lars

Abstract

The process of globalization encompasses economic and financial integration. The abolition of capital controls and the dismantling of barriers of different kinds will expose previously sheltered companies to shocks originating in the global economic arena. Policy-makers in already globalized countries have learned that market participants should be prepared in due time to meet the new exposure to fluctuating rates of exchange, interest and inflation. China has recently adopted a version of the International Financial Reporting Standards (IFRS) in an effort to improve the quality of information available for risk management and for pricing of risk. This paper analyzes the gains in transparency from the implementation of IFRS in Europe as of January 2005 and reports no improvements in regard to the macroeconomic impact on firms. Based on this experience, improvements for Chinese adoption are suggested. The paper presents a framework for how to understand and measure the impact of different scenarios on corporate performance. It also elaborates on how to communicate the macroeconomic effects to external stakeholders of the firm in a way that should foster further economic growth in China.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 21 (2010)
Issue (Month): 1 (February)
Pages: 66-75

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Handle: RePEc:eee:asieco:v:21:y:2010:i:1:p:66-75

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Web page: http://www.elsevier.com/locate/asieco

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Keywords: International Financial Reporting Standards Transparency Economic growth Macroeconomic impact Globalization;

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  1. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-64, April.
  2. Oxelheim, Lars & Wihlborg, Clas, 2008. "Corporate Decision-Making with Macroeconomic Uncertainty: Performance and Risk Management," OUP Catalogue, Oxford University Press, number 9780195335743, September.
  3. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  4. Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
  5. Verrecchia, Robert E., 2001. "Essays on disclosure," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 97-180, December.
  6. Robert M. Bushman & Joseph D. Piotroski & Abbie J. Smith, 2004. "What Determines Corporate Transparency?," Journal of Accounting Research, Wiley Blackwell, vol. 42(2), pages 207-252, 05.
  7. Oxelheim, Lars & Ghauri, Pervez, 2008. "EU – China and the Non-transparent Race for Inward FDI," Working Paper Series 745, Research Institute of Industrial Economics.
  8. Reese, William Jr. & Weisbach, Michael S., 2002. "Protection of minority shareholder interests, cross-listings in the United States, and subsequent equity offerings," Journal of Financial Economics, Elsevier, vol. 66(1), pages 65-104, October.
  9. Oxelheim, Lars, 2000. "Routes to Equity Market Integration - The Interplay between Politicians, Investors and Managers," Working Paper Series 526, Research Institute of Industrial Economics.
  10. Oxelheim, Lars & Randoy, Trond, 2003. "The impact of foreign board membership on firm value," Journal of Banking & Finance, Elsevier, vol. 27(12), pages 2369-2392, December.
  11. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
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Cited by:
  1. Hartwell, Christopher A., 2011. "All That’s Old is New Again: Capital Controls and the Macroeconomic Determinants of Entrepreneurship in Emerging Markets," MPRA Paper 40257, University Library of Munich, Germany.

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