The effects of corporate disclosure on firm value and firm performance: evidence from Turkey

Abstract

Purpose

The purpose of this study is to investigate the effects of firms’ disclosure practices on firm value and firm performance.

Design/methodology/approach

Firms’ disclosure scores were calculated based on unique hand-collected data by using the S&P transparency and disclosure index (S&P TD index). Ordinary least squares with year/firm fixed effects and two-stage least square methods were used to test the hypothesis.

Findings

It is observed that firms’ disclosure scores have positive and statistically significant effects on firm value. However, firms’ disclosure scores do not have significant effects on firm performance. This result is mostly observed in sub-categories of the index.

Practical implications

Results show that disclosed information has an impact on firm value. Therefore, standardization and increasing the reliability of this information are necessary for both information users and firms. It is important to standardize the information published by the firms and to increase their reliability by implementing new regulations by regulatory bodies in Turkey.

Social implications

Firms bear the costs due to their disclosure practices. However, the benefits derived from this situation may be higher than the cost incurred. Hence, it is suggested that firms that are traded in Turkey consider this in the determination of their disclosure policy.

Originality/value

This is the first study that investigates the effects of firms’ disclosure scores on both firm value and firm performance by using the S&P TD index in the Turkish context.

Citation

Temiz, H. (2021), "The effects of corporate disclosure on firm value and firm performance: evidence from Turkey", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 14 No. 5, pp. 1061-1080. https://doi.org/10.1108/IMEFM-06-2020-0269