Global convergence of financial reporting and resilience to fiscal spillover shocks

In today’s interconnected global economy, economic shocks in one country often propagate across borders, causing significant fluctuations worldwide. Constructing a novel country-to-country multiplex network framework, this study demonstrates that financial reporting convergence enhances a country’s resilience to spillover shocks, resulting in a 16.12% and 23.30% decrease in the sensitivity of employment and value-added to shock-induced fluctuations. This resilience effect arises from network diversification, enabling countries to allocate resources more strategically across a broader range of foreign partners. Our findings are robust to multiple identification strategies. Overall, our study underscores the importance of global financial reporting convergence in reducing network risk and strengthening countries’ economic stability in the face of external shocks.