Government transparency and firm-level operational efficiency

Abstract

We examine the informational role of governments in the private sector in emerging economies. Using a large sample of private firms, we show that governments’ ability and willingness to collect and disseminate economic information (government transparency) is positively associated with firm-level operational efficiency and access to external financing. Several cross-sectional analyses corroborate our main findings. We find that the effect of government transparency is stronger for firms operating in weaker alternative information environments. We also find a reduced effect of government transparency in countries with better-developed capital markets that facilitate capital allocation and production efficiency. Additional analyses using the World Bank-supported Open Government Data initiative as a staggered shock to government transparency provide further support to our primary results. Overall, our paper sheds light on the important role played by governments in emerging markets in aggregating and disseminating economic information.