This is a consequence of regulation, local norms, and the set of information, privacy, and business policies concerning corporate decision-making and operations openness to employees, stakeholders, shareholders and the general public.
[1] Recent research suggests there are three primary dimensions of corporate transparency: information disclosure, clarity, and accuracy.
The strategic management of transparency, therefore, involves intentional modifications in disclosure, clarity, and accuracy to accomplish the firm's objectives.
Companies with great corporate transparency are expected to enjoy lower cost of external financing resulting in more opportunities for growth.
Next, transparency can lead to better reflection of company specifications in the stock prices and greater extent of monitoring by outside investors.
[4] On the other hand, low levels of corporate transparency are linked with moral hazard extracting firm resources for private benefit.
As a part of this work, Standard & Poor's Governance Services publishes a transparency index which calculates the average score for the largest public companies in various countries.
[9] In 2002, the China Securities Regulatory Commission (CSRC) issued a code of corporate governance affecting practices and structures employed by Chinese firms.
One year later, the CSRC allowed qualified foreign institutional investors (QFII) to enter the Chinese stock market.
It was found that QFIIs have greater control over state shareholders in state-owned companies than domestic mutual funds and are more prone to act as unbiased monitoring body.
It then issued a white paper on Corporate Transparency and Register Reform in February 2022,[14] which sought to reflect the government's responses to these consultations.
[16] The law requires businesses to disclose their beneficial owners to the U.S. Department of Treasury in an effort to curb illegal economic activities.