Financial reporting quality linked to wins in competitive Japanese tenders

What the study found: Firms with greater quantity and higher-quality financial reporting were more likely to win contracts in competitive tenders in Japan. No such effect was found in non-competitive tenders, and political connections weakened the link between disclosure and procurement outcomes.
Why the authors say this matters: The authors say the findings highlight the role of formal transparency under institutional constraints. They suggest that improving financial reporting transparency can improve fairness and efficiency in public procurement by reducing agency costs, and that political influence creates risks that may call for regulatory reform.
What the researchers tested: The study examined how financial reporting quantity and quality relate to government procurement outcomes in Japan, using data from 2020 and 2021. It analyzed 4,955 firm-years of listed companies winning 6,870 central government tenders from JETRO, distinguishing competitive from non-competitive tenders and running sub-sample analyses by political connection. The researchers used probit, ordinary least squares, and tobit regressions, with instrumental variables and propensity score matching as robustness checks.
What worked and what didn't: Disclosure quantity and quality were associated with higher likelihood of winning contracts in competitive tenders. The same pattern was not observed in non-competitive tenders. Political connections weakened the disclosure–procurement relationship, which the abstract describes as a substitution effect.
What to keep in mind: The available summary does not describe detailed limitations beyond the study’s scope, including its focus on Japanese central government tenders and the 2020–2021 period. The findings are based on listed firms and the data and methods described in the abstract.

Key points

• Greater quantity and higher-quality financial reporting were linked to a higher chance of winning competitive tenders.
• No disclosure effect was found for non-competitive tenders.
• Political connections weakened the disclosure–procurement link.
• The authors describe the result as evidence for a substitution effect between political connections and formal transparency.
• The study used Japanese procurement data from 2020–2021 and included robustness checks with instrumental variables and propensity score matching.