Corporate transparency and firm value: Does market competition play an external governance role?

Chengcheng Liu, Qing Li and Yu-En Lin

Journal of Contemporary Accounting and Economics, 2023, vol. 19, issue 1

Abstract: We investigate whether market competition affects the relationship between corporate transparency and firm value in the United States using a sample of 12,665 firm-year observations, representing 1,644 individual firms for the period 1996–2018. The results show that stronger transparency enhances firm value, and market competition has a significantly positive effect on that relationship. More importantly, we use hierarchical linear models further to explore the cross-level interaction impact of market competition, and we find evidence suggesting that the industry-level competition has a significant cross-level moderating effect. Additionally, consistent with the substitute perspective, we also find that the disciplinary power of competition on the relationship between transparency and value is more pronounced for firms with weak corporate governance. Overall, our evidence supports the “bright side” of the competition view and highlights the active external governance role that competition plays in the value promotion effect of corporate transparency at both the individual and the industry levels.

Keywords: Corporate transparency; Firm value; Market competition; External governance (search for similar items in EconPapers)
JEL-codes: D40 D80 G30 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:19:y:2023:i:1:s1815566922000297

DOI: 10.1016/j.jcae.2022.100334

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