Ownership transparency and access to government procurement: evidence from private

Speaker: Xiaodong(Chris) Zhao

Venue: Room A423, School of Management, Zijingang Campus

Abstract: Directive (EU) 2015/849 (the 4th Anti-Money Laundering Directive [AMLD4]) of the European Union (EU) requires firms to identify and disclose their ultimate beneficial owners. Exploiting AMLD4 as an exogenous shock to private firms’ ownership transparency, we document that private firms in the EU are more likely to win government procurement contracts after AMLD4 adoption. Cross-sectional analyses show that the impact of AMLD4 appears stronger when governments (i) know less about bidding firms, (ii) procure products from R&D-intensive or durable goods industries, (iii) have higher-quality beneficial owner information, and (iv) have more discretion in contract allocation. Moreover, allocating more contracts to private firms reduces procurement costs and the unemployment rate. Overall, ownership transparency may help ease informational frictions when governments procure from private firms. This study underscores the effectiveness of ownership transparency as a type of nonfinancial disclosure that narrows the transparency gap between private and public firms.