The Resource Curse: A Corporate Transparency Channel
We propose and investigate a new channel through which the resource curse - a stylized fact that countries rich in natural resources grow slower - operates. Predatory governments are more likely to expropriate corporate profits in natural-resource industries when the price of resources is higher. Corporations whose profits are more dependent on the price of resources can mitigate the risk of expropriation by reducing corporate transparency. Lower transparency, in turn, leads to inefficient capital allocation and slower economic growth. Using a panel of 72 industries from 51 countries over 16 years, we demonstrate that the negative effect of expropriation risk on corporate transparency is stronger for industries that are especially vulnerable to expropriation, in particular, for industries whose profits are highly correlated with oil prices. Controlling for country, year, and industry fixed effects, we find that corporate transparency is lower in more oil price-dependent industries when the price of oil is high and property rights are poorly protected. Furthermore, corporate growth is hampered in oil price-sensitive industries because of less efficient capital allocation driven by adverse effects of lower transparency.
|Date of creation:||Oct 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christian Leuz & Felix Oberholzer-Gee, 2003.
"Political Relationships, Global Financing and Corporate Transparency,"
CREMA Working Paper Series
2003-03, Center for Research in Economics, Management and the Arts (CREMA).
- Christian Leuz & Felix Oberholzer-Gee, . "Political Relationships, Global Financing and Corporate Transparency," Center for Financial Institutions Working Papers 03-16, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Daniel Berkowitz & Yadviga Semikolenova, 2006. "Privatization with Government Control: Evidence from the Russian Oil Sector," William Davidson Institute Working Papers Series wp826, William Davidson Institute at the University of Michigan.
- Marianne Bertrand & Sendhil Mullainathan, 2000.
"Do CEOs Set Their Own Pay? The Ones Without Principals Do,"
810, Princeton University, Department of Economics, Industrial Relations Section..
- Marianne Bertrand & Sendhil Mullainathan, 2000. "Do CEOs Set Their Own Pay? The Ones Without Principals Do," NBER Working Papers 7604, National Bureau of Economic Research, Inc.
- Black, Bernard S. & Love, Inessa & Rachinsky, Andrei, 2006. "Corporate governance indices and firms' market values: Time series evidence from Russia," Emerging Markets Review, Elsevier, vol. 7(4), pages 361-379, December.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:6547. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.