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Impact of Voluntary Disclosure on Valuation of Firms: Evidence from Indian Companies

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  • B. Charumathi
  • Latha Ramesh

Abstract

This article investigates the effect of voluntary corporate disclosures on the firm value from the market value perspective. Financial reporting includes disclosures as prescribed by regulators, but few companies go beyond mandatory requirements and provide additional information voluntarily. This study empirically tests the extent of such voluntary disclosures using Corporate Voluntary Disclosure Index containing 81 items of both financial and non-financial information and panel data regression to test the hypotheses. The sample for this study is the non-financial companies in the BSE 100 Index and the period is five financial years from 2010–2011 to 2014–2015. This study finds a positive association between voluntary disclosures and firm value as measured by Tobin’s Q. Especially the market gives a higher valuation for companies disclosing optional information on social and environmental, corporate governance and financial information. This finding has a significant implication for emerging economies like India and it supports various disclosure theories such as agency, stakeholders and positive accounting theories.

Suggested Citation

  • B. Charumathi & Latha Ramesh, 2020. "Impact of Voluntary Disclosure on Valuation of Firms: Evidence from Indian Companies," Vision, , vol. 24(2), pages 194-203, June.
    • Handle: RePEc:sae:vision:v:24:y:2020:i:2:p:194-203
    DOI: 10.1177/0972262920914138
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    4. Arpita Sharma & Shailesh Rastogi, 2021. "Impact of Efficiency on Voluntary Disclosure of Non-Banking Financial Company—Microfinance Institutions in India," JRFM, MDPI, vol. 14(7), pages 1-21, June.
    5. Shailesh Rastogi & Bhakti Agarwal, 2023. "Transparency and disclosure (TD) and valuation of Indian banks," Bank i Kredyt, Narodowy Bank Polski, vol. 54(5), pages 519-540.
    6. Palaniappan Gurusamy, 2024. "Corporate Ownership Structure and Its Effect on Capital Structure: Evidence from BSE Listed Manufacturing Companies in India," IIM Kozhikode Society & Management Review, , vol. 13(2), pages 135-153, July.
    7. Venkata Mrudula Bhimavarapu & Shailesh Rastogi & Jagjeevan Kanoujiya & Aashi Rawal, 2023. "Repercussion of financial distress and corporate disclosure on the valuation of non-financial firms in India," Future Business Journal, Springer, vol. 9(1), pages 1-19, December.
    8. Waleed M. Al-ahdal & Faozi A. Almaqtari & Mosab I. Tabash & Abdulwahid Abdullah Hashed & Ali T. Yahya, 2023. "Corporate Governance Practices and Firm Performance in Emerging Markets: Empirical Insights from India and Gulf Countries," Vision, , vol. 27(4), pages 526-537, August.

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