Market reactions to transparency international reports on corporate anti-corruption

• Type: Article in International Scientific Journal
• Date: 2016-02-01

Authors

Renata Melo (Author) FEP; Manuel Castelo Branco (Author) FEP; Den Patten (Author) Other

Journal

Title: Accounting and the Public Interest

Vol. 16

Pages: 84-99

ISSN: 1530-9320

Publisher: American Accounting Association

Indexing

Scopus - 5 Citations

Google Scholar

Crossref

Other information

Authenticus ID: P-00M-S41

DOI: 10.2308/apin-51680

Abstract (EN): In this paper, we examine the investor response to the issuance of Transparency International¿s (TI) 2012 and 2014 Transparency in Corporate Reporting: Assessing the World¿s Largest Companies reports. Building on prior studies of political cost-inducing events in the environmental domain, we anticipate a negative market reaction, although we argue that the adjustment will be less severe for firms rated as having better anti-corruption disclosure. Focusing on a sample of U.S. companies to control for country-level effects and to allow for comparison with the prior environmental-themed studies, we document a significantly negative market reaction to the first TI report issuance. Although also negative, the market reaction to the 2014 report was not statistically significant. However, we also document that, as expected, market adjustments differ significantly across subgroups based on anti-corruption disclosure in both time periods. These results hold controlling for other factors potentially influencing investor perceptions of exposure to the report issuances. In general, our results are consistent with the prior studies and indicate that the market is savvy to political cost exposures arising from non-environmental events. The findings also suggest that TI¿s efforts may be increasing stakeholder pressure for corporate anti-corruption performance, but we caution that further investigation of the relation between disclosure and underlying performance in the corruption domain is warranted.

Language: English

Type (Professor's evaluation): Scientific