Author(s)

Yuanzi Shen ¹

Affiliation(s)

¹ The University of Sydney, Sydney, NSW 2006, Australia

Corresponding Author

Yuanzi Shen

ABSTRACT

This paper conducts a quantitative study on the impact of corporate financial transparency on market performance. Utilizing hierarchical and vector autoregression (VAR) models to analyze data from the U.S. and Chinese markets, the research reveals significant effects of financial transparency on reducing information asymmetry and enhancing market stability. Higher levels of financial transparency improve investor understanding of corporate financial conditions, reduce market volatility, and optimize stock price performance. Particularly during periods of economic fluctuation, financial transparency effectively serves as a buffer against market uncertainties. These findings provide empirical support for the formulation of relevant financial policies and underscore the critical role of transparency in the global capital markets.

KEYWORDS

Corporate financial transparency; market performance; information asymmetry; market volatility

CITE THIS PAPER

Yuanzi Shen, A study of the correlation between corporate financial transparency and market performance. Financial Engineering and Risk Management (2024) Vol. 7: 27-35. DOI: http://dx.doi.org/10.23977/ferm.2024.070504.

REFERENCES

[1] Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Economics, 31(1-3), 405-440.
[2] Bushman, R. M., Piotroski, J. D., & Smith, A. J. (2004). What determines corporate transparency? Journal of Accounting Research, 42(2), 207-252.
[3] Lang, M. H., & Lundholm, R. J. (1996). Corporate disclosure policy and analyst behavior. The Accounting Review, 71(4), 467-492.
[4] Verrecchia, R. E. (2001). Essays on disclosure. Journal of Accounting and Economics, 32(1-3), 97-180.
[5] Diamond, D. W., & Verrecchia, R. E. (1991). Disclosure, liquidity, and the cost of capital. The Journal of Finance, 46(4), 1325-1359.
[6] Leuz, C., & Verrecchia, R. E. (2000). The economic consequences of increased disclosure. Journal of Accounting Research, 38(3), 91-124.

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