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The Economic Impact of the Lack of Transparency in Financial Reporting

Author

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  • Gerald Lander
  • Kathleen Auger

Abstract

Off-balance-sheet amounts are in the trillions of dollars, not including all transactions with off-balance-sheet implications. Financial managers and consultants intentionally structure transactions that are abusive of off-balance sheet accounting rules, which leads to a lack of transparency in financial reporting. This paper explores several ways in which companies manipulate off-balance sheet transactions to satisfy personal and business objectives as well as the impact of such manipulations. It is time for regulatory bodies to close the loopholes, eliminate overly rules-based standards, clearly state the economic objective of each standard, and require firms to disclose the economic motivations for the accounting practices they adopt. Copyright International Atlantic Economic Society 2008

Suggested Citation

  • Gerald Lander & Kathleen Auger, 2008. "The Economic Impact of the Lack of Transparency in Financial Reporting," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 36(1), pages 105-116, March.
    • Handle: RePEc:kap:atlecj:v:36:y:2008:i:1:p:105-116
    DOI: 10.1007/s11293-007-9107-5
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    Cited by:

    1. Etienne Farvaque & Catherine Refait-Alexandre & Dhafer Saïdane, 2011. "Corporate disclosure: A review of its (direct and indirect) benefits and costs," International Economics, CEPII research center, issue 128, pages 5-31.

    More about this item

    Keywords

    Financial transparency; Corporate governance; Economic reality; Ethical awareness; D21; G20; G30; M00;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General

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