Impact of transparency and disclosure (T&D) and financial distress (FD) on the valuation of banks in India

Abstract

Purpose

The authors have attempted to reveal the impact that transparency and disclosure (T&D) and financial distress (FD) have on the valuation of banks working in India. T&D involves disclosing the firm's operational and financial performance and corporate governance practices. FD is a position in which a company or individual is not in a condition to fulfill their promise of paying their obligations on time.

Design/methodology/approach

In this study, the authors have used panel data analysis (PDA) and secondary data of 34 banks working in the Indian banking sector for four financial years, i.e. 2016 to 2019.

Findings

This study has established that FD and T&D have a positive and significant impact on the valuation of firms. The authors also find evidence that T&D significantly impacts the value of firms under the influence of FD.

Practical implications

The present study implies that it will help firms realize how significantly the transparency level and disclosure policies impact their value in the market. Firms can understand how badly distressing situations can impact the company's whole image. This learning will encourage them to start managing their money and debts efficiently.

Originality/value

The authors study has considered T&D as an independent variable and FD as a moderating variable to find the interacting impact of T&D and FD on the valuation of banks working in India. No such study has come to the authors' knowledge that has established such a relationship of variables in the study.

Citation

Rawal, A., Rastogi, S., Kanoujiya, J. and Bhimavarapu, V.M. (2022), "Impact of transparency and disclosure (T&D) and financial distress (FD) on the valuation of banks in India", Journal of Economic and Administrative Sciences, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JEAS-03-2022-0053