Do investors value the nonfinancial disclosure in emerging markets?

This paper studies the impact of the nonfinancial disclosure on firm value for a large sample of Indian firms, arguably emerging market with poor investor protections and legal enforcement. We proxy the nonfinancial disclosure by the Bloomberg score on the extent of a firm's Environmental, Soci...

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Bibliographic Details
Published in:Emerging markets review 2018-12, Vol.37, p.32-46
Main Authors: Chauhan, Yogesh, Kumar, Surya B.
Format: Article
Language:English
Subjects:
Business group
Emerging markets
ESG investing
Firm value
India
The cost of funds
The nonfinancial disclosure
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Summary:This paper studies the impact of the nonfinancial disclosure on firm value for a large sample of Indian firms, arguably emerging market with poor investor protections and legal enforcement. We proxy the nonfinancial disclosure by the Bloomberg score on the extent of a firm's Environmental, Social, and Governance disclosures, and find positive valuation effects associated with the nonfinancial disclosure. We find the nonfinancial disclosure is more valuable to standalone firms compared to business group firms. This paper shows that the positive valuation effects associated with the nonfinancial disclosure are attributable to lower cost of funds and higher operating cash flows. •We study the impact of the nonfinancial disclosure on firm value Indian firms.•We find positive valuation effects associated with the nonfinancial disclosure.•Nonfinancial disclosure is more valuable to standalone firms than business group firms.
ISSN:1566-0141
1873-6173
DOI:10.1016/j.ememar.2018.05.001