This article discussed survey results collected by the Berlin-based Transparency International. The formal survey, called “Transparency in Corporate Reporting consisted of 3 categories, reporting on anti-corruption programs, organizational transparency, and country-by-country reporting of revenue, expenses, and tax payments. After surveying 100 companies, the study showed that Chinese companies scored poorly overall. The car company Chery Automobile Co. received a score of 0 for all 3. Only one other company scored as poorly as Chery. The survey also found “eight of the 10 lowest scoring companies were Chinese. Out of the BRICS India overall received the highest scores.
As an investor companies with low transparency might cause hesitation on whether to invest. If a company’s corporate heads are taking money from the net income to pay for private homes or falsifying earnings, it can be near impossible to price adequately such a company. As the Chinese Government begins to crackdown on corruption, practices of poor transparency may hurt investments in low scoring companies who thought they had a viable product to generate revenue. With less faith in the US financial system, investment abroad may go to India due to transparency and proper reporting instead of China.