Accounting for Globalization: Evaluating the Effectiveness of Country-by-Country Reporting

Abstract

While the USA and the EU are mandating disclosure of payments to governments by companies in the extractive sector, these measures are a far cry from the original idea of country-by-country reporting. This paper evaluates potential effectiveness of the mandated and full CBCR in terms of policy objectives, the nature of information involved, as well as the behavior of users and disclosers. It argues that the limited scope, depth and status of mandated CBCR inhibit its potential value to investors and other users, and consequently make the change in disclosers’ behavior less likely. Following the lead of the US, and the model of the Extractive Industries Transparency Initiative, the European Commission framed CBCR as designed to help resource-rich countries, ignoring the potential of full CBCR to address broader global governance issues. Although intelligible in its political context, the EC decision cannot be justified on the grounds of pure policy effectiveness.

Keywords: accounting standards, public policy, governance, Europe, resources, corporate social responsibility

JEL Classification: P16, D78, M40