International Financial Reporting Standards (IFRS), corporate performance and economic growth

Transparency and economic growth have become buzzwords in the economic-political debate in recent years. On the one hand, lack of transparency is used in an ex post way as explanation to corporate scandals like Enron, Worldcom and Parmalat with assumed effects on economic growth. On the other hand, transparency is used in an ex ante way as a driver of improved economic growth as in the Lisbon process with its use of benchmarking (and the Open Coordination Method). Few research reports have tried to link transparency to economic growth. Transparency is a multidimensional and situation-related word with information asymmetry as a kind of the least common denominator. This article addresses the optimal transparency regarding macroeconomic influences on the firm. It is discussed to what extent the implementation as of January 2005 of the International Financial Reporting Standards (IFRS) for European firms will mean an approach to an optimal-transparency-release of information that will reduce information asymmetry, lower agency costs, lower cost of capital and foster investment and economic growth at the macro level.