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Transparency and Disclosure and Financial Distress of Non-Financial Firms in India under Competition: Investors’ Perspective

Author

Listed:
  • Jagjeevan Kanoujiya

    (Symbiosis Institute of Business Management, Symbiosis International (Deemed University), Pune 412115, India)

  • Rebecca Abraham

    (Huizenga College of Business, Nova South Eastern University, 3301 College Avenue, Fort Lauderdale, FL 33314, USA)

  • Shailesh Rastogi

    (Symbiosis Institute of Business Management, Symbiosis International (Deemed University), Pune 412115, India)

  • Venkata Mrudula Bhimavarapu

    (Symbiosis School of Banking and Finance, Symbiosis International (Deemed University), Pune 412115, India)

Abstract

Transparency and disclosure (T&D) of information trigger the interest of all stakeholders, including investors in a company. Cognizance of the company’s financial health before investing is very necessary. Disclosure of information in the firm’s financial reports reflects the firm’s financial performance. A firm’s financial health protects investors’ and other stakeholders’ interests and the firm’s long-term sustainability. Owing to the importance of T&D and a firm’s financial health, this paper investigates the impact of T&D on the financial distress (FD) of non-financial firms (NFFs) listed in India. This study examines both linear and nonlinear connectivity of T&D and financial distress (FD). Their association is also investigated in a competitive scenario (under the moderating effect of competition). The panel data analysis is incorporated into the study having 78 NFFs as cross-sectional units with a timeframe from 2016 to 2020. Altman Z-score measures a firm’s FD (higher Z-score means low FD). BOS (Berger, Ofek and Swary) and AC (Almeida and Campello) scores are taken to consider investors’ perspectives of the firm’s FD. The T&D and Lerner indexes are used to assess the level of T&D and competition. The findings reveal that a higher T&D level decreases a firm’s financial stability or increases a firm’s FD. In nonlinear association, it is found that T&D has an inverted U-curved connection with financial stability or U-curved association with FD. It indicates that initially, higher T&D reduces FD, and after a threshold, it increases FD. However, under competition, T&D is not found to be significantly impactful for FD. The study is novel as no previous study has focused on such association under competition and taking investors’ perspective of a firm’s FD.

Suggested Citation

  • Jagjeevan Kanoujiya & Rebecca Abraham & Shailesh Rastogi & Venkata Mrudula Bhimavarapu, 2023. "Transparency and Disclosure and Financial Distress of Non-Financial Firms in India under Competition: Investors’ Perspective," JRFM, MDPI, vol. 16(4), pages 1-20, March.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:4:p:217-:d:1110943
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    Cited by:

    1. Jagjeevan Kanoujiya & Shailesh Rastogi, 2024. "Nexus between efficiency and financial distress of listed firms in India: a comparative study using frontier techniques," OPSEARCH, Springer;Operational Research Society of India, vol. 61(2), pages 835-866, June.

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