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Franco, Forum 3 - discussion week 3
Advanced Business Research Methods (Liberty
University)
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THE ROLES OF TRANSPARENCY IN MARKETS AND
SOCIETY
The Role of Transparency in Markets and Society
Maria Franco-Cortes
Liberty University
lOMoARcPSD|22671317
THE ROLES OF TRANSPARENCY IN MARKETS AND
SOCIETY
The Role of Transparency in Markets and Society
Introduction
Transparency is usually discussed among organizations and employees as a tool for
improvement. According to Farrell (2016), to create an organization that makes better decisions
and creates better processes while generating employee engagement, transparency should be
implemented. Transparency can also be applied to the government sector under some conditions
as it provides benefits like having less corruption. However, a full analysis should be made to
understand transparency's unique roles and mechanics within an organization or a society as a
whole. Multiple authors discuss current trends and future research opportunities.
Current Trends
Leaders are continually looking for great tools to improve effectiveness in managing an
organization. Employees are looking for transparency in the decision-making process, and they
are frustrated when they do not have enough information to understand the current situation. The
lack of information cause employees to perceive a lack of value increasing stress and uncertainty
(Farrell, 2016). On the other hand, when managers or leaders demonstrate high levels of
transparency, they communicate trust. Farrell (2016) reaffirms that transparency reduces
speculation and increases cohesiveness within an organization. Leaders build transparency by
getting to know their employees and asking for feedback complementing an organization's more
formal communication channels.
Innovation is a keyword when talking about effective businesses as it drives both
competitiveness and economic growth. A study based on 29 countries was conducted by Zhong
(2018) to analyze transparency in boosting innovation. The first study provides managers
insights to reduce managers' career concerns while connecting them to innovation strategies.
The
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THE ROLES OF TRANSPARENCY IN MARKETS AND
SOCIETY
results show that innovation is a crucial driver of economic growth and firm competitiveness.
Transparency enhances managers' innovative efforts by improving access to external financing
and facilitating the allocation of R&D capital (Zhong, 2018).
Di Maggio & Pagano (2017) aim to answer whether the disclosure of financial
information and the transparency of security markets can be detrimental to issuers. The authors
present a model under the assumption of complete transparency of the security market by
exploring the interaction between financial disclosure and market transparency. Results show
that enhancing information disclosure can be beneficial for speculators and no for hedgers (Di
Maggio & Pagano, 2017). Also, an increase in transparency can make the absence of news more
salient for investors. For example, house hunters can access the number of days a house has
been available in the market, helping potential buyers make better decisions (Di Maggio &
Pagano, 2017).
Pozen (2019) disagrees with most scholars and advocates viewpoint about transparency.
He describes mentions that transparency should be viewed in instrumental terms and not as a
normative or an end in itself (Pozen, 2019). Therefore, the article's two main goals suggest that
there is nothing incoherent about transparency policies leaving positive outcomes in a particular
setting. The second goal is to understand how transparency policies operate in a broad sense that
incorporates methodologies and multiple disciplines. After conducting a more sociological
study, based on critical scrutiny of transparency policies' social dimensions, the author
concludes that transparency is ambiguous ad inherently social in nature (Pozen, 2019).
According to Cucciniello et al. (2016), although government transparency effectively
achieves specific outcomes, it does not always have positive outcomes. During the last two
decades, transparency has been integrated at every level of government. However, scholars do
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THE ROLES OF TRANSPARENCY IN MARKETS AND
SOCIETY
not believe transparency can fulfill all the objectives. After identifying articles and conducting a
systematic literature review, it is clear that transparency is subject to limitations if it is not used
correctly. Elements like government, citizen characteristics, and policy domain affect the
effectiveness of transparency in the government sector (Cucciniello et al., 2016).
Future Research
There are a few areas of future research on this topic. According to the article,
"Transparency," each leader's responsibility is to investigate and decide what processes are
adequate to assess a specific situation (Farrell, 2016). Zhong (2018) addresses many topics that
were not analyzed; however, further research is needed on examining how or whether accounting
information is used in informal multi-period contracting with executives. From a more
sociological perspective, futures research should go beyond abstract assumptions and include
legal, political, and cultural contexts to understand better how transparency policies operate
(Pozen, 2019). Cucciniello et al. (2016) also suggest that further research is needed to understand
better what can be done to improve the way transparency is used to address issues at a
government level. Finally, further research about model disclosures and strategic behavior is
needed (Di Maggio & Pagano, 2017).
Word count: 735
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THE ROLES OF TRANSPARENCY IN MARKETS AND
SOCIETY
References
Cucciniello, M., Porumbescu, G. A., & Grimmelikhuijsen, S. (2016). 25 Years of Transparency
Research: Evidence and Future Directions. Public Administration Review, 77(1), 32–
44. https://doi.org/10.1111/puar.12685
Di Maggio, M., & Pagano, M. (2017). Financial Disclosure and Market Transparency with
Costly Information Processing*. Review of Finance, 22(1), 117–153.
https://doi.org/10.1093/rof/rfx009
Farrell, M. (2016). Transparency. Journal of Library Administration, 56(4), 444–
452. https://doi.org/10.1080/01930826.2016.1157426
Pozen, D. E. (2019). Seeing Transparency More Clearly. Public Administration Review, 80(2),
326–331. https://doi.org/10.1111/puar.13137
Zhong, R. I. (2018). Transparency and firm innovation. Journal of Accounting and
Economics, 66(1), 67–93. https://doi.org/10.1016/j.jacceco.2018.02.001
