Earnings Opacity, Stock Market Wealth Effect and Economic Growth

This paper examines how accounting quality, as measured by earnings opacity, affects the stock market wealth effect, which in turn is shown to be linked to economic growth. Stock market wealth effect is negatively affected by earnings opacity. The data also indicate that the exogenous component of the stock market wealth effect the component defined by earnings opacity-is positively associated with economic growth. The direct effect of earnings opacity on economic growth is, as expected negative, but insignificant.