considersomeoftheempiricalevidenceontherelationship
between firm value and complexity.
Cost of Opacity
In thepreceding section,we referred to the opacity index
developed byPriceWater-house tomeasure theopacity of
transparency of financial statementsin 35 countries.In an
interesting extension, Price Waterhouse also attempted to
examinetheimpactoftheopacityindexontwovariablesthat
have direct consequences for value. The first was a
“tax-equivalent” cost, where the opacity measure was
convertedintoan equivalenttaxrate.AsPriceWaterhouse
notesinitsreport,anincreaseintheopacityindexfromthe
Singaporelevel(whichisthemosttransparent)totheChinese
level istheequivalentof anincrease in thetaxrateof 46
percent.Table 16.5summarizes the findings.
TABLE16.5 EconomicCostofOpacity: “Tax-Equivalent”
Estimates
Source:Price Waterhouse.
Country O-FactorEquivalent Tax Rate
Argentina 61 25%
Brazil 62 25
Chile 36 5
China 87 46
Colombia 60 25
Czech Republic 71 33
Ecuador 68 31