Abstract:
The aim of this study is to investigate the impact of corporate transparency and firm value. Although
managers are getting allowances to disclosure more, existing literature reveal that the disclosure
brings negative effects and additional cost. However, being transparent is better way to boost up
investors’ confidence through that firms could enhance their value. To clear out these conflicts
current study empirically investigates the problem using three proxies of firm value such as return
on equity, modified Tobin’s Q and share price. Corporate transparency were measured based on the
adjusted S&P disclosure and transparency items under three aspects namely, financial transparency
and information disclosure, board and management structure and processes and ownership structure
and investor rights. The study considered all the listed firm in Colombo stock exchange as the
population and after the careful elimination, total of 126 Sri Lankan listed companies were selected
to the empirical analysis. Hypotheses of the study were tested based on the multiple regression. The
result of the study reveal that the corporate transparency positively influence on firms’ value in Sri
Lankan setting. This result could be practicable by disclosing more information voluntarily. This
study contributes to the existing literature by examining the corporate transparency through modified
disclosure index.
