Capital market effects of corporate transparency and sustainability: evidence from an emerging economy

Abstract

Purpose The study aims to examine the association between corporate transparency and firm value (capital market effect) and investigate whether auditor choice moderates this relationship. Design/methodology/approach This study uses the Malaysian Institute of Corporate Governance (2017) data set, which provides scores on anti-corruption commitment, organisational transparency and sustainability of Malaysia’s top 100 listed firms. The methodology entails an ordinary pooled least square regression method for empirical research. Findings The positive association between corporate transparency and firm value is more evident in anti-corruption and sustainability initiatives. More importantly, government-linked companies have higher scores. Firms with enhanced anti-corruption commitment are more likely to have higher firm value, and this relationship is more evident for politically connected firms. This study also finds that auditor choice is associated with the firm value in the sampled listed firms. Practical implications The findings provide implications for investors and regulators on the role of corporate transparency in an emerging capital market. Social implications The study recommends that emerging market regulators continue enhancing corporate governance codes and practices to improve reporting transparency for listed firms. Originality/value This study contributes to the growing literature on sustainability disclosures by incorporating corporate reporting transparency, explicitly relating to firms’ commitment to anti-corruption, organisational transparency and sustainability.