Friday, December 30, 2011


Disclosures inside the annual reports of businesses from emerging market nations are frequently less extensive and much less credible than those of organizations from developed nations. Insufficient and misleading disclosure and lax investor protection have been cited as aspects contributing to the East Asia economic crisis of 1997. The low disclosure levels in emerging-market countries are consistent with their systems of corporate governance and finance. Equity markets usually are not well developed, banks and insiders for instance household groups provide the majority of the financing, and so in general there has been less demand for credible, timely public disclosure than in more developed economies.

However, investor demand for timely and credible information about corporations in emerging-market nations has been expanding. Regulators have responded to this demand by producing disclosure specifications much more stringent, and by stepping up their monitoring and enforcement efforts.

A recent study presents evidence supporting the view that disclosure levels and high quality are lower in emerging-market nations than in created countries. The study is concerned with the “opacity” of earnings in countries around the world. Opacity, the opposite of transparency, can be thought of because the extent to which an earnings amount obscures genuine economic efficiency. nations in terms of their overall earnings opacity from least to most opaque. Emerging-market countries have a tendency to have the most opaque earnings. A additional concern is having sufficient numbers of accountants and auditors to monitor and enforce sound monetary reporting systems. Generally, you'll find far fewer accountants and auditors per capita in emergingmarket countries than in developing nations, suggesting prospective enforcement difficulties in emerging markets.

Empirical evidence on disclosure practices in emerging-market countries was restricted till lately. Nonetheless, as these countries’ stock markets and listed firms seek to raise their presence, researchers are creating additional evidence on what these practices are and how they differ from those in developed countries.

Related Post