Corporate transparency among government suppliers: Implications for firm valuation

Corporate transparency has a positive impact on firm valuation, as predicted by agency theory; however, the transparency of strategically important government suppliers is not rewarded with higher valuations as the market expects politically sensitive firms to be inherently more transparent. The association between transparency and valuation among politically sensitive firms is consistent with the political cost hypothesis. We address endogeneity concerns using propensity score matching, Heckman's self-selection models and entropy balancing. Our findings offer novel insights, suggesting that the influence of transparency on corporate valuation varies with political sensitivity – a significant consideration for both finance professionals and scholars.