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Resource Curse: A Corporate Transparency Channel

Listed author(s):
  • Art Durnev

    (University of Iowa (Henry B. Tippie College of Business))

  • Sergei Guriev

We propose a new channel through which expropriation risk reduces capital allocation efficiency and decreases firm growth. We build an agency model of corporate disclosure when companies face risks of expropriation. The model predicts that in countries with insecure property rights, corporations mitigate the risk of expropriation by reducing transparency. We test this channel by employing a difference-in-difference approach. Using a panel of over 16,000 firms from 84 countries, we find that transparency of companies prone to expropriation is lower in countries with insecure property rights. The reduced transparency has an adverse effect on the efficiency of capital allocation and corporate growth.

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Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/5um2bhne3f862raaulvoogm15e.

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Date of creation: May 2011
Handle: RePEc:spo:wpmain:info:hdl:2441/5um2bhne3f862raaulvoogm15e
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