Financial Transparency, Labor Productivity, and Real Wages

Financial transparency can affect labor markets directly by mitigating information asymmetries and optimizing the matching of heterogeneous firms and employees (matching efficiency channel) and indirectly through the effect of transparency on firms' capital inputs (capital utilization channel). Exploiting the increase in financial transparency following the mandatory IFRS adoption by European Union countries, we document subsequent increases in labor productivity and wages for manufacturing industries in member countries. Collectively, our results underscore that the benefits of a cross-country increase in transparency go beyond the effects on capital markets and corporate investments, with implications for labor markets equilibria