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

Jagjeevan Kanoujiya, Rebecca Abraham (), Shailesh Rastogi and Venkata Mrudula Bhimavarapu
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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

JRFM, 2023, vol. 16, issue 4, 1-20

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.

Keywords: corporate governance; transparency and disclosure; financial distress; competition; investors (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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