Premium
Transparency, Value Creation, and Financial Crises
Author(s) -
Silva Ana C.,
Chavez Gonzalo A.,
LopezLubian Francisco J.
Publication year - 2013
Publication title -
journal of applied corporate finance
Language(s) - English
Resource type - Journals
eISSN - 1745-6622
pISSN - 1078-1196
DOI - 10.1111/j.1745-6622.2013.12009.x
Subject(s) - shareholder , transparency (behavior) , financial crisis , business , accounting , earnings , earnings management , financial system , debt , finance , shareholder value , corporate governance , economics , macroeconomics , political science , law
This article reports the findings of the authors' recent study of the impact of the level of corporate transparency on shareholder value creation during periods of financial crisis. Their sample consists of the companies comprising Spain's IBEX 35 stock index during the ten‐year period 2000–2010. The study uses three different measures of earnings management (EM) as inverse indicators of the quality of disclosure and carries out fixed effects regressions that adjust for firm and industry characteristics, two periods of financial crises, and the passage of time. The main findings of the study are that (1) companies with lower disclosure quality have generated less value for their shareholders over long time periods and that (2) the shareholders of companies that were more aggressive in managing their earnings experienced greater wealth destruction during the two financial crises of the last decade. Given the still unfolding impact of the recent global financial crisis, as reflected in the current debt crisis in Western European countries, the authors' study reinforces the importance of the current debate over the benefits and costs of increasing the regulation of financial markets, especially in the areas of transparency and disclosure requirements.