Abstract
The extant literature provides evidence on the impact of financial disclosure environments on international capital mobility. However, to our knowledge, there are no such studies including Latin-American countries. We aimed to fill this void by assessing the influence of accounting information on international capital mobility in a twenty-two-country sample, including the three largest Latin-American countries: Argentina, Brazil and Mexico. The countries included in the sample represent around 80% of the world's GDP from 1995 to 2001. Our empirical results show with a 99% confidence level that the degree of disclosure of value-relevant accounting information has positively influenced international capital mobility. We also show, with a 95% confidence level, that countries where financial accounting is less aligned with tax accounting present higher international capital mobility. The three Latin-American countries studied present relatively low levels of disclosure among the sampled countries. However, whereas Argentina and Brazil show low levels of capital mobility, Mexico stands out with a high capital mobility, which we reckon could be accounted for by the country's trade and investment connections with the US and by its participation in the NAFTA.
Highlights
Since the 1960s, several empirical studies on the effects of the disclosure of accounting information on capital markets have been produced
This work concludes that countries whose legislation enforces higher levels of disclosure of accounting information and where financial accounting is not influenced by tax accounting present higher international capital mobility
Stock price and market capitalization data of firms established in the sampled countries, as well as interest rates on US Treasury Bills and Brazil’s country risk, are necessary to compute the measure based on the international CAPM
Summary
Since the 1960s, several empirical studies on the effects of the disclosure of accounting information on capital markets have been produced. A recent work assessed the influence of accounting information on international capital mobility in a study involving 23 countries (Young & Guenther, 2003). This work concludes that countries whose legislation enforces higher levels of disclosure of accounting information and where financial accounting is not influenced by tax accounting present higher international capital mobility. This study becomes especially relevant for connecting different areas of contemporary knowledge (administration, finance, accounting, and economics), for revealing the degree of development of LA’s accounting standards, as well as for providing guidelines for decision making, both at the corporate and the regulatory levels, since it becomes clear that the disclosure of the countries’ accounting information affects the perception of risk and, the decision making of international investors
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