Management Accounting Section Midyear Meeting

Financial Transparency, Internal Controls, and Impression Management

• In Event: Managerial Topics in Analytical Research

Abstract

There has been a movement towards financial transparency within firms. Transparency is said to boost firm profitability by motivating employees. I provide a novel mechanism for why financial transparency motivates employees. My model predicts that financial transparency induces greater productive investment from the decision-makers. This is due to their desire to manage the employee's impression of his productivity. I also introduce a novel benefit of financial transparency by showing that the greater investment decreases the need for costly internal controls.

Author

• Abhishek Ramchandani, The University of Texas at Austin