New Index Measures Impact Of Opacity

Compiled By Deborah Austin Professional services firm PricewaterhouseCoopers has launched a global index that measures the impact of opacity -- defined as lack of "clear, accurate, formal, and widely accepted practices" -- on the cost of capital around the world. Assembled by PricewaterhouseCoopers Endowment for the Study of Transparency and Sustainability, a panel of economists and researchers has created an analytical model correlating five key opacity factors: legal protections for business, macroeconomic policies, corporate reporting, corruption, and government regulations. The "O-Factor," a composite of these five, is a determinant not only of capital costs, but of obstacles to direct foreign investment in a country. The index also helps pinpoint business, economic and regulatory best practices offering the strongest impact on economic development, says PricewaterhouseCoopers CEO James Schiro. The first Opacity Index report views opacity's impact from two perspectives: as a form of hidden corporate tax and as a risk premium when countries borrow through sovereign bond issuance. It outlines the O-Factor in 35 nations. For a summary and complete version of the report, visit www.opacityindex.com

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