Financial Transparency, Labor Productivity, and Real Wages: Evidence from Mandatory IFRS Adoption

ABSTRACT Financial transparency can affect labor markets directly by mitigating information asymmetries and optimizing the matching of heterogeneous firms and employees (matching efficiency channel) and indirectly through the effect of transparency on firms’ capital inputs (capital utilization chann...

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Bibliographic Details
Published inJournal of international accounting research Vol. 22; no. 3; pp. 31 - 61
Main Authors Golshan, Nargess M., Khurana, Inder K., Silva, Felipe B. G.
Format Journal Article
LanguageEnglish
Published Sarasota American Accounting Association 01.10.2023
Subjects
Capital markets
Employees
Human resources
International Financial Reporting Standards
Investments
Labor productivity
Manufacturing
Real wages
Transparency
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Summary:ABSTRACT Financial transparency can affect labor markets directly by mitigating information asymmetries and optimizing the matching of heterogeneous firms and employees (matching efficiency channel) and indirectly through the effect of transparency on firms’ capital inputs (capital utilization channel). Exploiting the increase in financial transparency following the mandatory International Financial Reporting Standards (IFRS) adoption by European Union countries, we perform a battery of tests that indicate subsequent increases in labor productivity and real wages for manufacturing industries in member countries. More importantly, we find evidence that both channels are economically relevant in explaining gains in labor productivity and real wages following the mandatory IFRS adoption. Collectively, our results underscore that the benefits of an increase in transparency go beyond the effects on capital markets and corporate investments, with implications for the allocation of human resources across corporations.
ISSN:1542-6297
1558-8025
DOI:10.2308/JIAR-2022-044