No. 115: Financial transparency of private firms: Evidence from a randomized field experiment

Year: 2023
Type: Working Paper


This paper examines why firms choose to be financially transparent or opaque by conducting a field experiment with more than 25,000 private firms in Germany. We inform a randomly chosen set of firms about a disclosure option that allows eligible firms to restrict access to their otherwise publicly available financial statements. We also vary the messaging of these emails in subtle ways to induce experimental variation in the probability that firms take transacting (capital providers or customers and suppliers) versus non transacting stakeholders (competitors or general interest parties) into consideration when making their filing decision. Based on firm’s actual filing decision, we find that treated firms are 15% more likely to restrict access to their financial statements. This intention-to-treat effect is persistent and concentrated among firms that should derive lower net benefits from disclosure (smaller, more mature firms in less capital intensive industries). These findings indicate that informational constraints affect firms’ disclosure practice. Additionally, we show that the treatment effect is almost 40% larger for firms that have a higher, exogenously induced, probability of considering non-transacting stakeholders when making their disclosure decision.

Participating Institutions

TRR 266‘s main locations are Paderborn University (Coordinating University), HU Berlin, and University of Mannheim. All three locations have been centers for accounting and tax research for many years. They are joined by researchers from LMU Munich, Frankfurt School of Finance and Management, WHU – Otto Beisheim School of Management, ESMT Berlin and Goethe University Frankfurt who share the same research agenda.

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