As future corporate leaders of the society, it is important for us, commerce students, to know how an organization functions. All kinds of organizations, whether for profit or not-for-profit must have some sort of system which keeps it running.
Let’s take for example, our school. The University of San Carlos is known to have a lot of students and is well known for its technologically advanced facilities that cater to the needs of the student body. In our recent brainstorming and prior discussions in school, we’ve come up with the terms, corporate transparency and efficient allocation of resources. We thought this would be a great and somewhat interesting issue particularly on ...view middle of the document...
In short, the university is somewhat lacking in efficiency regarding the availability and dissemination of information which must be addressed immediately for the school not to suffer anymore losses.
THE RESEARCH PROBLEM
1. Is corporate transparency present in the University of San Carlos?
2. How did such presence or absence affect the University’s resource allocation?
• These first two questions we want to address to the University are related to each other in that we want to prove that a company’s transparency reflects on their efficiency and effectiveness in allocating resources.
• By being able to obtain the answers regarding transparency and resource allocation, we will be able to uncover the vital effect of transparency in the company.
3. What criteria are being followed in accepting or rejecting a certain project, when transparency is being practiced?
4. How does management determine or decide on which projects are best fit to be undertaken using the resources of the University?
5. What are the issues the management considers when allocating resources when it follows the doctrine of corporate transparency?
• The next three questions would be able to give us the significance of the criteria being followed by the University. It would also provide for the processes being taken in order for projects to be approved and if the criteria being set are followed.
• By knowing the answers to these questions, we will be able to see clearly the relationship of transparency, criteria and resource allocation.
BACKGROUND OF THE PROBLEM
Based on a research assignment, we came across the problem of the relationship between corporate transparency and efficient allocation in one of the articles from the Journal of Accounting Research. It examined whether a country’s corporate transparency environment, which includes the quality of accounting information, contribute to its resource allocation’s efficiency.
Prior research points to the role of financial institutions in economizing on information costs by noting the positive relation between financial development and economic growth. While important, these studies do not directly address the role of a country’s information environment on the efficient allocation of resources, and financial development per se does not necessarily eliminate information frictions in a country (Rajan and Zingales 1998).
The methodology used to examine the relationship between transparency and asset allocation was the Fisman and Love’s (2004) methodology. Under this approach, the dependent variable is the degree of comovement (correlation) in industry-specific growth rates for a common set of industries in two countries. They tested the role of corporate transparency in efficient resource allocation by examining whether comovements in growth rates are associated with...