Influence of Corporate Transparency on Market Capitalisation

Размещено на http://www.allbest.ru/

FEDERAL STATE AUTONOMOUS EDUCATIONAL INSTITUTION OF HIGHER EDUCATION

NATIONAL RESEARCH UNIVERSITY

«HIGHER SCHOOL OF ECONOMICS»

Faculty of Economic Sciences

The educational program «Strategic Corporate Finance»

MASTERS THESIS

Influence of Corporate Transparency on Market Capitalisation

Moscow 2015

Introduction

This paper examines the relationship between corporate transparency and firm value. Corporate transparency is one of the most important attributes of corporate governance mechanisms and important factor to increment governance quality. Lack of transparency brings conflicts between company shareholders and management, known as asymmetry of information and agency conflicts. These conflicts influence negatively on company performance and market value. High quality corporate transparency and disclosure practices adopted within the company, create the preconditions for optimal allocation of investments, as investors are fully aware of the state of the company at the very moment and the resources are invested effectively. In my, thesis I am going to firsty extract recent corporate transparency estimates, which are based on Russian integrated report disclosure methodology index. Then I examine whether variations in transparency across companies influence company market value.

Researchers and market regulators have recognized the importance of transparency long since. Over the past decade, many countries have enacted laws requiring companies to provide more transparency and disclosure. The primal causes for the tightening of the law were the events around companies such as Enron, Worldcom, Aol, and Tyco. The absence of corporate transparency and absence of accuracy in reporting, in these firms, resulted in the losses for the investors and companies' bankruptcy. All those events made the investors to lose confidence in market, as they no longer were able to distinguish companies worth investing from the ones, which were not. In such kind of situations, investors apply to all companies as if they are similar. This effect is known as the market of lemons (Akerlof 1970).

First time influence of transparency on firm value was mentioned in 1958 in the theory of Modigliani and Miller. It is assumed that investors and management possess equal information on the use and risks of the company. Today it is also an important theme for empirical research. With the development of new markets, and growing number of public companies in developing countries, researches on this topic are becoming the vital issue. Every company has to determine how much information to reveal and consider the possible effects of such revelations on the company.

At the same time, scientists propose some negative aspects coming together with the increase of information disclosure (Benjamin Germalin, 2007). This is why companies should not exaggerate the positive effect of it. Revealed information can be used by competitors or by the government. KPMG (1994) reports the possible cost which may arise from disclosing information: information disclosed by the company to gain lower cost of capital can harm company if the market does not appreciate the information. In addition, there is a risk of arising of the litigation costs, information collection and disclosure costs. Scholars propose companies to choose the optimal level of disclosure, analyzing the costs and benefits. Especially it is vital in countries with low security of private property, where even government can violate the law.

In our research, we have defined transparency as "the availability of information and relating to specific companies for people outside the company"(Bushman 2003). The transparency analysis is not only an opportunity for investors to get financial information, but also a chance to get to know the non-financial parts of the companies. As in all other studies of this topic, we are going to use a transparency index to determine the level of corporate transparency, which include financial and non-financial information disclosure by the firm. Claire Marston (2010) analyzes variety of transparency measures and information disclosure data collection methods, transparency index valuably differentiated. As it gives in my case ability to control the information used in the process of gathering information for constructing indexes.

I exploit 2013 full-year corporate transparency and disclosure ranking results of the ``Russian Integrated Report” issued by the Regional Integrated Report research community for 100 listed companies in Russia (Transparency 2013). That report is used to represent the market's assessments of the completeness, clarity and transparency disclosure practice of Russian companies and fits the available transparency measurement practice now, quantifying financial and non-financial information. For making deeper analysis, we added additional three years, having final period of 2010- 2013.

The information that is used for assessment includes annual reports and company websites. The 4-year data set and the use of a fixed effects regression model for panel data minimizes the endogeneity problem found in cross sectional studies based on a single year's data. The object of the study are Russian public companies traded on the Russian and international stock markets. The subject of the study is the relationship between the level of transparency of the companies and the market value. The aim of the study is to identify the specifics and consequences of the level of transparency of Russian companies on the market value. Research tasks include: learning literature and materials on this topic, choosing and construction of transparency index, analysis of received data on index, empirical test of influence, explanation of results, recommendations for future studies.

Theorethical literature has suggested warious ways thrue which company information disclosure can affect firm value. As it was mentioned high-grade disclosure can help prevent misevaluation and draw investors. Moreover, increased information disclosure assist agency conflicts, by increasing the level of external monitoring and control. Which in turn positively influence corporate governance and corporate vaue. All togerther this effects propose incentive to increase company disclosure in an effort to decrease firm undervaluation. The following hypothesis are put forth in this study

H1: Firms with higher transparency index are expected to have higher value.

Russia being a developing country has only 24 years of capital market history. However, according to the IMF (2014) it has sixth economy in the world, which reports great achievement in a such short period comparing other developing countries with lot more capital market history. First laws regulating disclosure requirements passed in 1996 (Federal Law 1996). By this time the last changes were included in April 2015, it states that public companies have to disclose quarterly report, consolidated reports and the statements of material facts disclose of which can affect price of securities. So, one of the last important introductions is that companies in the future will be dividing on the companies for public and nonpublic type, leaving back the confusion in companies type.

Russian public companies strongly differ in the quantity and the quality of information which they disclose. According to the investigation done by S&P rating agency (S&P 2010), Russian companies demonstrate the high volatility in information disclosure. From the beginning of research disclosure level increased, however, this trend can be explained by the few large companies with a high disclosure level and other companies with a stable low level of disclosure.

Our empirical results offer evidence that information disclosure matters for Russian listed companies. Specifically, we observe that there is a negative and statistically significant relation between company valuation and the quality of disclosure practice, as measured by the transparency index, even after the inclusion of variables to control firm characteristics, board characteristics, and ownership structure. Although similar studies on related topics have already been carried out, this study is among the first to analyze firm value as a function of information transparency and firm-specific characteristics using new and broader transparency measure, which analyzes quality factors of information disclosure. More specifically, the novelty of this paper lies in its use of new index, research period and broader set of companies.

This paper is organized as follows. Section 1 is an introduction to the topic and description of further study. In Section 2, I will conduct an analysis of the literature devoted to the research of transparency and the market value of companies. I consider separately the overseas research and studies on the Russian market. Section 3 includes data and methodology analysis used in this work. Section 4 shows descriptive statistics on data. Section 5 describes the main results. Section 6 analyzes the results and recommendations.

transparency market capitalisation

1. Analysis of previous researches

Yan-Leung Cheung, Ping Jiang and Weiqiang Tan (2010) attempts to assess the transparency of Chinese listed companies by using OECD principles of corporate governance. To analyze the interrelation of company's transparency and its effect on market evaluation the authors use transparency index. This transparency index composed of five OECD principles: the rights of shareholders, equitable treatment of shareholders, and the role of stakeholders, disclosure and transparency and board responsibility and composition.

They divided index into the information disclosed mandatory and voluntarily by the companies. They used Chinese disclosure law to quantify the level of disclosure. The authors basing on transparency index come to several conclusions: there is indeed a significant relation between company transparency and market value. Secondly, separate regression between mandatory and voluntary disclosure index, showed that only companies disclosing more information than required by the law are valued more than companies disclosing only mandatory information.

Researchers Poshakwale and Curtis (2005) argue that there is a relationship between the level of voluntary disclosure and the cost of equity. The higher the level of voluntary disclosure, the less uncertain investors are. With the less uncertainty, investors are willing to accept a lower required rate of return and expect higher future dividends and this increasing the value of the firm at the end.

Lung, Lins and Maffet (2011) examined the relation between stock market liquidity, transparency and company valuation. They found that liquidity is one of the channels thru which transparency affects company value. They documented positive relationship between transparency, cost of capital and Tobins'Q.

Ozbay (2009) investigated the effect of transparency on the performance and value of Turkish companies for a period of 1995 - 2005. He used an index compiled by S&P. His study found significant confirmation that company's transparency and performance impact company valuation. A distinctive aspect of this study was that the author used a sufficiently large number of variables to measure performance. As a result, not all cases were significant. However, shortcomings of this study was the factor that studies were conducted using old data, so there was no reflected important aspect as the introduction of IFRS standards introduced in Turkey in 2005. Many of these authors have attached great importance to this factor. In addition, this study is important from the point of view of the analysis of an emerging market companies.

Unlike from others, Benjamin Germalin (2007) constructed a model of optimal relationship of transparency and corporate governance of companies. One result of the study was found a negative relationship between increased disclosure and profitability. In this situation, the author's propose is to find the optimal level of disclosure, where the interests of management and shareholders will be considered.

Patel and Dallas (2002) conducted research using T&D (Transparency and Disclosure) index published by the S&P (Standarts and Poors) company for the United States. The results showed that companies with a lower index are riskier, but they have found a positive association between high index and the value of the company. In addition, they found that the additional information submitted by the companies except required by the law on the company's annual report also had a positive relationship with the company's value. However, another research done by Patel (2002) for an emerging countries showed the possibility of negative effects of transparency index on market value measured by Tobin's Q. Countries such as Brazil, South Africa and Poland demonstrated the negative influence of increased transparency on corporate value.

Yawen Jiao (2011) found a positive correlation of transparency using AIMR (Association for Investment Management and Research) index with the company's market value, performance and profitability indicators. Unlike other researchers who compared direct index with the performance of the company, he created two different equity portfolios according to the index rating, and then compared the rates of return and value of companies.

Silva (2004) conducted a study on three Latin American countries. They investigated the relationship between Tobin's Q as an indicator of the value of companies and the variable responsible for the availability of financial information on the company's official webpage. The results showed strong and significant relationship between company size, sector of the economy and company value. The main hypothesis was not rejected, arguing that disclosure of information on the company's webpage positively affect company value.

In addition, the researchers examined the effect of tax on the market value and transparency of companies. From the point of view of companies, reducing the tax base increases the value of companies. Xiaohang (2010) investigated the relationship between the transparency of the company and the level of tax evasion. The results showed that more companies that are transparent had demonstrated a greater tax evasion and enhanced greater market value.

Researchers noticed that besides firm-level relationship between firm value and transparency, there is a need to consider country factors. Guriev (2011) argues that companies in countries with weak legal system need to consider potential costs, which may arise from increasing the company transparency. One of the possible costs comes arise from the side of the government, increased transparency may attract attention of the state, which in turn increases, the risk of losing private property. In this situation, the companies tend to hide information and disclose only information required by the state. That in turn negatively affects market value of the company and may possibly demotivate company in increasing its market value.

Erunza (2009) found the same results according to their extensive research including 59 countries. They claim that some firms that are supposed to win from increasing the level of transparency, actually cannot take full advantage of it. They also found that in countries with a high level of protection of private property, high corporate transparency increases the effectiveness of investments and increases company growth by reducing information asymmetry. Richard D. Morris and Sidney J. Gray (2007), Bushman (2004) came to the similar outcomes from their researches.

If group of researchers above, are right claiming that country factors influence the level of disclosure and transparency company choose, with which I agree too, then we need to pay attention to the conclusions of Art Durnew (2005). Although he agrees that legal systems matter, he discovered that in countries with weak legal system companies anyway seek to improve the management level and improve information transparency. All of this suggests that even in countries with underdeveloped legal system companies strive to achieve transparency.

It is important to mention, that in all studies related to the transparency, being listed on the international stock markets found to be an important factor for a company. Companies listed on overseas markets have to fulfill laws requiring more broad information disclosure. Craig Doidge (2002) investigated international companies listed on U.S stock exchange markets. He finds that during the period of 1997 cross-listed companies were 16% higher Tobin's Q than companies from the same countries. And the valuation premium has a negative relationship to shareholders protection level in home countries.

1.1 Researchers done on Russian market companies

The topic of transparency in Russia is not as well studied as in the western countries. But it is gaining interest and amount of research increasing every year. It is worth noting that in this matter played a major role availability of mature transparency measure in Russian market companies. For the years it's role was given to T&D index prepared for the Russian companies by S&P Credit Rating Company. It is widely used in research on the Russian market, and perhaps it has become a prerequisite for the feasibility of such studies.

Ruzhanskaya LS (2010) conducted a study of 30 Russian companies. The results indicate the presence of a positive relationship between the index of transparency and the value of the company. In addition, it has identified a number of important factors in the Russian market companies. First, it is worth noting the growth of transparency index began after 2000, stopped in 2009. The author concludes that reaching a certain level, the company is not motivated to increase transparency. In addition, the increase in the index related to large companies, but the variation between the index of big companies is very high. This may be due to the type of industry and sources of funding.

Zinkevich's (2007) finds a positive relationship. But it is not so strongly expressed. In addition, analysis of past IPO companies shows an increase in transparency, but after the IPO, increase transparency stops. This situation is a very good description of the fate of Russian companies left on an initial public offering in foreign markets. With the more stringent requirements of the market, companies are increasing their transparency index, but after posting this trend slow or stops. Another possible explanation for the large gap in transparency between the index by digging a slowdown.

Researchers Ilyin, Berezinets, Orlova (2009) conducted a study of 64 Russian companies. The results of the study found no evidence of the relationship between the index of transparency and financial performance of companies. Only the size of the companies was statistically significant. They used own index for this study. One of the obstacles in the study was about the fact that many companies were not made public. This is very different from the logic of public companies. The authors suggest further research as to build a more comprehensive index that takes into account aspects of the life of Russian companies.

The same results showed exploration done by Suman Banerjee (2014). He conducted research on introduction of Corporate Governance reforms beginning from 2002-2004 to company performances in Russia. They used T&D index as a proxy of corporate transparency. Company performance indicators showed a negative effect of increasing in corporate accountability on market value started by the government for the period before and after the introduction of reforms. He argues that the reforms started by the government are weak and cannot alleviate the agency conflicts in the companies.

1.2 Literature analysis conclusion

In conclusion, researchers came up with a set of possible outcomes. In some countries, transparency level may affect negatively, in others with positive effect. One possible explanation is the use variety of measures of transparency, which cannot guarantee comparison of results done for the different outcomes in different set of countries. Moreover, it is important to consider the country factors that in some situations are more influence than firm level factors.

I can notice that most of the negative results are seen in developing countries and in countries with weak legal system and poor private protection. Russia is a developing country with a short history of market economy and legal imperfections can influence the decision of companies to disclose information. Moreover, the most of the researches show absence of influence or negative result. During our study, we should take into consideration the outcomes of these studies.

The aim of the study is to identify the specifics and consequences of the level of transparency of Russian companies on the market value. The object of the study is public companies and subject of the study is the relationship between the level of transparency and the market value. I test the hypothesis whether firms with higher transparency index are expected to have higher value. Research tasks include: learning literature and materials on this topic, choosing and construction of transparency index, analysis of received data on index, empirical test of influence, explanation of results, recommendations for future studies.

The investigation contribution to the relatively limited existing literature by implementing the new local transparency measurement index, new research period and larger companies sample. Introduction of this measure gives hope for the future research and the possibility to compare results in a long term. While most of the pervious researchers done for the Russian market are determining the factors influencing the level of transparency. In this study, we answer the question how does the transparency level impacts on companies value.

2. Data and methodology

In this research, in order to estimate the regression, the fixed effect model is used. It is the most popular model dealing with transparency and company valuation. It is popular due to it is ability to decrease the endogeneity problem. More companies that are profitable tend to reveal more information. Investors in this situation value high profits more, than increase in information disclosure, which lead to endogenaity. Moreover including large set of control variables helps to mitigate this problem. Additionally, there was done (Breusch-Pagan is used whether Pooled OLS or RE is suitable) and Hausman tests, to justify use of fixed effect model. See attachment 1

The final model looks like

(1)

The study`s sample consists of the 2010-2013 Rating Agency Expert 400 largest listed Russian companies. The Expert ranking is based on market capitalization of all Russian firms listed around the world, including New York, London, Singapore, and Hong Kong stock exchanges.

The core of this study is a use of Russian Integrated Report scores as a measure of corporate transparency index. Integrated report is a new trend in corporate reporting; it was started from 2000 worldwide. To Russia, it came in 2012, when a few companies decided to publish their reports according the report principles. Starting from the 2012, Russian Integrated Report Network (http://ir.org.ru begun rating companies, according to the international integrated report content analysis methodology. Model and methodology were approved by Russian Industrial Union and Association of Corporate Directors. Content analysis consists of 104 questions with a maximum 100 points. It is a first time using these scores as a measure of corporate transparency. An integrated report consists of six fundamental principles.

· Strategic focus and orientation for the future: An integrated report is a look at the organization's strategy, as well as how it relates to the ability of the company to create value in the short and long term, as well as its use of capital and the influence on them.

· Connectivity Information: Integrated report as extensive picture of the value must reflect the relationship and interdependence between the components that are essential to the organization's ability to create value over time.

· Response and involvement of stakeholders: Integrated Report should provide a look at the quality of the organization of relations with key stakeholders, as well as how and to what extent the organization understands, it takes into account and responds to their legitimate needs, interests and expectations.

· Materiality and briefness: Integrated Report should provide summary information, which is essential to assess the organization's ability to create value in the short, medium and long term.

· Accuracy and Completeness: Integrated report should include all significant issues, both positive and negative, in a balanced way and without significant errors.

· Comparability and consistency: The information in the integrated report should be presented in a way that would make possible comparability between organizations in the framework of how it is essential for our own history of the value of the reporting enterprise, and on the basis of which will be constant over time.

These principles should be applied in determining the content of integrated reports based on key elements of the content, the submission of which is to make clear the connection between them. Content elements are grouped between the quality of accounting information and accounting quality. Where each group consist of 3 criteria. See table 1.

Integrated report significantly differs from the previous measures of transparency used in Russian transparency researches before. Firstly, it is including broader content analysis embracing the most important factors in corporate disclosure. Secondly, scorings are not given just for the availability of the information, but also evaluate the quality. Minimum it starts from 0,25 points to maximum 5 points for the question. It is greatly differs from T&D index and other indexes in previous researches, which analyzed only presence of information. Finally, all work done by independent public community and the rating extent every year. This gives opportunity to track changes on a yearly basis and make comparisons in the future studies. See questionnaire attachment 2

For the study, I have prolonged transparency index scores for the 2010- 2012, have used the same methodology and have conducted meeting with the head of regional integrated network director. The work is done by two people, this gives chance to prevent miscalculations and omit information. We look through annual report and web page of each company of the research period. We searched answers for the all 104 questions in the questionnaire methodology. In some cases we collected information from Interfax database and server of Russian disclosure webpage (e-disclosure.ru). In total it took more than one month just to read and visit the companies web page to collect scores. Finally, the sample consists of 51 public companies, from the variety of industries. However, collected transparency scores are not considered to be official data published by the Regional Integrated Report research community. They are maximally close to original data, gathered with the greatest capability by following data collection methodology. See list of companies in attachment 3

Other data are taken from Datastream (Thomson Reuters), Interfax (Spark) databases and corporate reporting. Is are Firm Size, Tobin's Q, Leverage and MTBV. Variables Committee, Overseas Listing, Duality Dummy, Board Independence Concentrate Dummy and State Shares are taken from companies' annual reports. These variables added to mitigate heterogeneity and to control firm characteristics.

3. Transparency index and descriptive statistics

Table 2 presents descriptive statistics of Transparency Index for the 51 Russian companies between 2010 - 2013 according to the Integrated Disclosure methodology. We can see the average score is 40.5 points for the whole period, it is 40% of a possible maximum score. Maximum score was 72 in a 2012 and the minimum was 19 points in a year 2011. The maximum score was given to Uralkali Company, and the minimum was given to Utair Company.

According to the Integrated Research the highest score from the beginning of measuring index was given to `Nizhny Novgorod Engineering Company Atomenergoproekt” (NIAEP) 92.75 points in a year 2012 and company “Rosatom” 88.25 points for the year 2013. It is important to mention that the highest scores for the 2012 -2013 were given to energy companies, which is relegated to the importance of disclosure in this industry. You can learn more about researchers in 2012-2013 in official web page www.ir.org.ru.

Table 3 show increase in transparency beginning 2010 till 2013. However, for the 2013 growth rate decreased sharply. Possible explanation can be that companies exhausted motivation to increase transparency, additional transparency increase costs higher than marginal increase in benefits. Moreover, companies attaining the given level of transparency stop increasing disclosure, which may possibly not required by the regulators. And another explanation can be possible risks which may come together with increased disclosure. It can be from the state authorities or rival companies. All these factors together influences the decision to disclose information.

TABLE 3

Table 4 exhibits Transparency index change for the period 2010 -2013 according to the groups. I can notice that the overall quality of accounting information is slowly increasing and the quality of accounting is also increasing. However, given results are small enough comparing the maximum possible score, 55 for the quality of accounting information and 45 for the quality of accounting

TABLE 4

Table 5 presents Transparency Index according to the 6 criteria. It shows that overall 6 criteria's are increasing slowly. Mostly they stabilized at the determined level with small changes. I can notice a sharp increase in the 3^rd criterion in 2013, possibly some companies significantly increased disclosure in this segment. Which is quality of disclosure about the organization's activities during the reporting period.

TABLE 5

The quality of information disclosure on the management strategy and it is implementation, business model and risks, the quality of information disclosure on corporate governance, disclosure about the organization's activities in the reporting period, the complexity and usability of reporting for different shareholders groups, the quality of public reporting system, and certification of the accounting information and complexity with international standards reporting guidelines.

Table 6 shows a spot graph of Tobin's Q and Index. I can see weak relation that did not change seemingly during the period and absence of strong linear relation.

Table 7 presents descriptive statistics for the company characteristics. Tobins'Q is equals to market value of equity divided by total assets. MTBV is measured as the market value of equity divided by total equity. Leverage is total debt divided by total equity. Firm size is equal to logarithm of sales and revenue. ROA is return on assets and equals net income divided by total assets.

Table 8 shows other companies characteristics. State shares are percent of shares owned by the state. Committee is a dummy variable, it is equal to 1 if company has at minimum one committee from audit, remuneration and nomination comities. Overseas listing is equal to 1 if company listed in a foreign stock exchange. Duality dummy equals to 1 if the CEO and the Chairmen of the Board are the same person. Concentrate dummy equals to 1 if 5 or less shareholders own 50 percent of the company. Board independence is the percent of independent Board members.

We can see that state controls on average 16 percent of shares. For the 96 percent of companies we have at least one committee from audit, remuneration and nomination. 58 percent of companies are listed both in overseas stock exchange and in internal stock exchange. 5 percent of companies have one person as a CEO and Chairman of the Board. 93 percent shares of the companies are owned by 5 or less main shareholders. 33 percent of Board of Directors are independent members. Additionally see correlation table attachment 4

5. Empirical results

Table 9 presents fixed effect panel regression results. We have 4 different model specifications using dependent variable Tobin's Q and MTBV.

Column 1 and 2 use Tobin's Q as a dependent variable. Specification 1 shows that Transparency Index in the company valuation equation dramatically lowers the company value by 2 percent. Column 2 adds company performance and characteristics. It also shows negative impact of transparency by 2 percent. Also negative sign demonstrated by the size. Positive and significant results are shown by ROA, Duality Dummy, Committee and Overseas listing.

Column 3 and 4 use MTBV as a dependent variable. They demonstrated Transparency index as insignificant. Overseas listing showed the same results as previous regression with Tobin's Q. Variables as Leverage and Board Independence are significant. The effect of leverage can be explained by the strong correlation between variables. Influence of Board Independence is difficult to explain.

Table 10 presents regression results using company performance variables and the regression with other specification. Results are similar to the previous regression. The estimates in the table 10 and 11 demonstrate the negative influence of corporate Transparency by 2 percent. Which is inconsistent with our hypothesis that the companies with higher transparency scores are expected to have higher value. The hypothesis rejected.

Overall results are coming together with previous studies done on Russian companies for the recent periods, nevertheless these results are related to chosen sample of companies and cannot be referred to all companies. Previous studies obtained negative results which do not give a clear explanation of this fact. In the most of cases, it can be explained by the weak legal system, low level of private protection in the country and influencing role of the state. Additionally, further studies including more broad set of companies and use of official Integrated Report research indexes may guarantee results that are more satisfactory.

Conclusion

Based on Integrated Report methodology index I have measured the transparency level for the 51 Russian public companies. Which consist of 104 questions and 6 categories: the quality of information disclosure on the management strategy and it is implementation, business model and risks, the quality of information disclosure on corporate governance, disclosure about the organization's activities in the reporting period, the complexity and usability of reporting for different shareholders groups, the quality of public reporting system, and certification of the accounting information and complexity with international standards reporting guidelines.

The main 6 research tasks such as learning literature and materials on this topic, choice and construction of transparency index, analysis of received data on index, empirical test of influence, explanation of results, recommendations for future studies have been successfully archived.

The 4-year period data between 2010 - 2013 is used to determine impact of corporate transparency on company valuation. Panel data fixed effect model regression revealed the negative influence of transparency on market value for the given sample of Russian companies. This implies that for this period increase in corporate transparency lead to decrease in market value. Moreover, we have found that companies listed overseas and the profitable companies are more valued.

Given results are useful for company management planning their information disclosure practice and for the future market regulators policy. Agreeing with Suman Banerjee that previous reforms in corporate governance are weak, maybe need to consider more broad set of reforms that may influence disclosure level and company values.

Recommendations for future research. First, use of Transparency Index assembled by Regional Integrated Report research for the future periods helps to track change in transparency level and compare influence for the different periods. And use of official published scores for the longer period, instead of collected by the academic researchers. According to our meeting with the head of Integrated Report research organization, they invited us to further their investigations and cooperation for the other topics related to Transparency. Exhibiting openness to more deeper study and cooperation for young scholars.

Secondly, future studies can cover other developing countries, include more broad set of industries to analyze the influence of industry, include private, state companies or it can include BRICS countries. Integrated report index methodology can be further developed and modified for the variety of researches.

The bibliography

1. Akerlof. 1970. "The Market for lemons: Quality Uncertainty and the Market Mechanism". Quarterly Journal of Economics 84: 488-500

2. Art & Durnev E. Han Kim, (2005 ) . " To Steal or Not to Steal: Firm Attributes, Legal Environment, and Valuation, " Journal of Finance, American Finance Association , VOL. 60 (3), pages 1461-1493, 06.

3. Benjamin E . Hermalin , Michael S. Weisbach, (2007) Transparency and Corporate Governance, NBER Working Paper No. 12875.

4. Bushman, Robert M. and Smith, Abbie J., (2003) "Transparency, Financial Accounting Information, Corporate Governance and". Economic Policy Review , Vol. 9, No. 1, Available at SSRN: http://ssrn.com/abstract=795547

5. Bushman, Robert M. and Piotroski, Joseph D. and Smith, Abbie J., What Determines Corporate Transparency? (April 2003). Available at SSRN: http://ssrn.com/abstract=428601 or http://dx.doi.org/10.2139/ssrn.428601

6. Craig Doidge, G. Andrew Karolyi, Rene M.Stulz (2002) “Why are foreign firms listed in the U.S. worth more?”. Journal of Financial Economics 71 (2004) 205-238. Available at NBER: http://www.nber.org/papers/w8538.pdf

7. Marston, Claire and Hassan, Omaima A. G., Disclosure Measurement in the Empirical Accounting Literature - A Review Article (July 15, 2010). Available at SSRN: http://ssrn.com/abstract=1640598 or http://dx.doi.org/10.2139/ssrn.1640598

8. Durnev, Art and Errunza, Vihang R. and Molchanov, Alexander, (2009) " Property Rights Protection, Corporate Transparency, and Growth " . Journal of International Business Studies , Vol. 40, Issue 9, pp. 1533-1562, Available at SSRN: http://ssrn.com/abstract=1808542 or http://dx.doi.org/10.1057/jibs.2009.58

9. Durnev, Art and Guriev, Sergei M., Expropriation Risk and Firm Growth: A Corporate Transparency Channel (May 9, 2011). Available at SSRN: http://ssrn.com/abstract=1320966 or http://dx.doi.org/10.2139/ssrn.1320966

10. Federal Law on the Securities Market (22 April 1996), article 30. Availiable at Consultant: http://www.consultant.ru/popular/cenbum/

11. Kamal Naser, Khalid Al-Khatib, Yusuf Karbhari, (2002) "Empirical Evidence on the Depth of Corporate Information Disclosure in Developing Countries: The Case of Jordan", International Journal of Commerce and Management , Vol. 12 Iss: 3/4, pp.122 - 155

12. KPMG, Robert K.Elliot, Peter D. Jacobson (December 1994) “Costs and Benefits of Business Information Disclosure'', American Accounting Association Accounting Horizons, Vol. 8, No. 4, pp 80-96.

13. Lang, Mark H. and Lins, Karl V. and Maffett, Mark G., Transparency, Liquidity, and Valuation: International Evidence on When Transparency Matters Most (December 15, 2011). Journal of Accounting Research (JAR), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1323514

14. Mendes-Da-Silva, Wesley and de Lira Alves, Luiz Alberto, (2004) "The Voluntary Disclosure of Financial Information on the Internet and the Firm Value Effect in Companies across Latin America". Universidad Navarra Barcelona, 13th International Symposium on Ethics, Business and Society. Available at SSRN: http://ssrn.com/abstract=493805 or http://dx.doi.org/10.2139/ssrn.493805

15. Modigliani, F .; Miller, M. (1958). "The Cost of Capital, Corporation Finance and the Theory of Investment". American Economic Review 48 (3): 261-297.

16. Mustafa Ozbay, (2009) The Relationship Between Corporate Transparency and Company Performance in the Istanbul Stock exchange, Kingston Business School, London

17. Patel, Sandeep A. and Da...