Corporate Disclosures and Financial Performance of Selected Indian Manufacturing and Non- Manufacturing Companies

Abstract

Disclosures play a pivotal role in addressing the issues related to information asymmetry and agency costs of firms. Voluntary disclosures are those disclosures which are beyond the compulsory ones and are communicated portraying a better image of the company and its prospects in front of its investors. Therefore this study intends to extend various aspects of corporate disclosure practices, mainly voluntary disclosures of selected Indian companies. Under contract theory of economics, information asymmetry leads to superfluous decisions because of information gap between the parties. It is also important to assess the possible economic consequence of voluntary disclosures i.e. the incentive by way of enhanced firm performance. The results of the study obtained through correlation and regression approach are very encouraging and are evident of stock returns responding to corporate voluntary disclosures, financial as well as non- financial, particularly in the recent years. The effect of increased disclosures on stock prices is of possible interest to investing community and stakeholders at large including the policy makers and regulators. It is not just about the level of disclosures but also the type of disclosures e.g. non-financial disclosure like forward looking, social, and environmental which play an important role in enunciating the association between the two variables. The paper sufficiently contributes towards literature on voluntary disclosures. Its major contribution is focused towards economic consequences of disclosures by way of better stock returns and implications for Indian stock market regulator to assess the impact of its policy on manufacturing and non-manufacturing companies listed in CNX 100 index of National Stock Exchange of India.