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Does trade globalization induce or inhibit corporate transparency? Unbundling the growth potential and product market competition channels

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  • Tong, Hui
  • Wei, Shang-Jin

Abstract

Trade globalization may affect corporate transparency via multiple channels, with potentially opposite signs. We aim to empirically disentangle these channels by tracking evolution of corporate transparency for 4061 listed firms in tradable sectors in 49 countries during 1992–2005. By using detailed tariff schedules, we measure changes in growth opportunities and product market competition enabled by foreign and domestic trade liberalizations, respectively. On the one hand, higher growth opportunities engendered by foreign trade reforms are disproportionately associated with better corporate transparency in industries that depend more heavily on external financing. On the other hand, greater product market competition engendered by domestic tariff reductions has no significant impact on corporate transparency.

Suggested Citation

  • Tong, Hui & Wei, Shang-Jin, 2014. "Does trade globalization induce or inhibit corporate transparency? Unbundling the growth potential and product market competition channels," Journal of International Economics, Elsevier, vol. 94(2), pages 358-370.
  • Handle: RePEc:eee:inecon:v:94:y:2014:i:2:p:358-370
    DOI: 10.1016/j.jinteco.2014.08.004
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    Keywords

    Trade globalization; Corporate transparency; Growth potential;

    JEL classification:

    • F1 - International Economics - - Trade
    • G3 - Financial Economics - - Corporate Finance and Governance

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