What Determines Corporate Transparency?

We investigate corporate transparency, defined as the availability of firm-specific information to those outside publicly traded firms. We conceptualize corporate transparency within a country as output from a multi-faceted system whose components collectively produce, gather, validate and disseminate information. We factor analyze a range of measures capturing countries' firm-specific information environments, isolating two distinct factors. The first factor, interpreted as financial transparency, captures the intensity and timeliness of financial disclosures, and their interpretation and dissemination by analysts and the media. The second factor, interpreted as governance transparency, captures the intensity of governance disclosures used by outside investors to hold officers and directors accountable. We investigate whether these factors vary with countries' legal/judicial regimes and political economies. Our main multivariate result is that the governance transparency factor is primarily related to a country's legal/judicial regime, while the financial transparency factor is primarily related to political economy