Impact of Corporate Transparency on Firm Value: Evidence of Listed Financial Institutions in Sri Lanka.

Abstract

Transparency is an important aspect of corporate governance since it decreases information asymmetry and allows stakeholders to make more informed decisions. On the other hand, increased disclosure may also bring about various risks, such as leaking of confidential information to rival businesses. An investigation into the relationship between corporate transparency and the firm value of financial institutions that are listed on the Colombo Stock Exchange (CSE) is the focus of this research. The research makes use of Tobin's Q as a method for determining the worth of a company, and it employs financial, governance, operational, and social transparency indices as independent variables. A sample of 61 publicly listed financial companies between the years 2021 and 2023 were considered. The procedures utilized were panel data regression. While the findings indicate that social transparency has a large and favourable impact on Tobin's Q, the results also indicate that financial transparency, governance transparency, and operational transparency do not exhibit a statistically significant effect. This study contributes to the existing body of literature on corporate governance by drawing attention to the role of social transparency in the process of growing company value. Additionally, it suggests implications for policymakers and corporate stakeholders.