Working Paper No. 1259

Optimal vs Satisfactory Transparency: The Impact of Global Macroeconomic Fluctuations on Corporate Competitiveness

Published: December 20, 2018Keywords: Macroeconomic fluctuations; Intrinsic performance; International financial reporting standards; Corporate information disclosure; Optimal transparency; Satisfactory transparency; Corporate governance systems; International cross-listingJEL-codes: F23; F37; G18; G32; G38; L25; M21; M41; M48

Optimal vs Satisfactory Transparency: The Impact of Global Macroeconomic Fluctuations on Corporate Competitiveness Lars Oxelheim


Being able to separate temporary global macroeconomic influences – caused by fluctuations in exchange rates, interest rates and inflation – from intrinsic performance – related to a superior product, production process or management - is crucial to the assessment of the development of a firm’s competiveness.

Against that background, the paper analyzes institutions’ role in making firms supply outside shareholders with relevant information corresponding to satisfactory transparency from the shareholder perspective. Based on a sample of the 100 largest public European firms it is found no firm provided information to the level deemed satisfactory by the outside shareholder. One explanation may be that optimal transparency for the firm does not equal satisfactory transparency for the outside shareholder.

However, the implementation of IFRS/IAS 1 in the EU as of 2005, and a company’s international cross-listing activities exhibit associations with better supply of information and a narrowing of the gap. Shareholders in the Anglo-Saxon corporate governance system are provided with more relevant information than those in other corporate governance systems.

The paper adds to the literature on the role of institutions in international corporate governance, with the particular focus on information asymmetries in an international business context.

Lars Oxelheim

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