Is Transparency Critical for Firm and National Competitiveness?

Wyld, R. (2009). Is transparency critical for firm and national competitiveness? Academy of Management Perspectives, Nov2009, Vol. 23 Issue 4, p94-96, 3p. Retrieved April 1, 2010, from: http://web.ebscohost.com.ezproxy.waterfield.murraystate.edu/ehost/pdfviewer/pdfviewer?vid=3&hid=6&sid=e6e23254-07e9-45ce-a924-989e7baff080%40sessionmgr11

This research brief was written by David C. Wyld, Robert Maurin Professor of Management at Southeastern Louisiana University. In it, he discusses corporate transparency or the lack thereof, which had a significant impact on the recent financial crisis that the world economy is still trying to recover from. He quotes a Mark Twain saying that: “figures don’t lie, but liars figure”, which highlights the importance of having independent verifiable financial information for investors. Research has shown that companies that are more transparent have higher growth rates, greater investment efficiency, lower costs of capital, and their stock prices reflect a more accurate gauge of the firm’s performance and value. The author looks deeper into this subject than just looking at the corporate level transparency and asks if country-wide market transparency helps competitiveness on the national level. Wyld quotes a recent study that has shown that lack of transparency creates information friction that slows the strategic movement of capital, which produces lower growth rates in countries where corporate financial information is withheld or is inaccurate. So, he concludes that the quality and transparency of a country’s information environment can contribute to opportunities for firms, and the countries where they reside, to grow in ways they cannot in less transparent environments. This article discusses an important subject that managers should be familiar with. There needs to be some level of transparency in the corporate world and this has to be regulated by the government. However, it is also important for the government to not overstep their role because too much regulation can stifle business as well; therefore, a balance needs to be established.