The effects of corporate disclosure practices on firm performance, risk and dividend policy

This article examines the effects of disclosure in corporate governance practices on firm performance, bankruptcy risk, leverage and dividend policy in public listed companies. We propose an enhanced transparency disclosure index (TDI). To measure disclosure and transparency more accurately, we use the recommended practices of the Malaysian Code on Corporate Governance 2012 (MCCG 2012), using scores between 0 and 1 for each item. Although previous studies have simplified their transparency index into a couple of independent items, we develop a formative second-order index, which is known as the Modified Transparency Disclosure Index (MTDI). We test our hypotheses in a 2009 randomly selected sample of 95 listed companies in Bursa Malaysia using Partial Least Squares (PLS) path-modeling and bootstrapping techniques. The results show that corporate disclosure practices have positive effects on company performance and negative effects on company leverage. This study does not find any significant relationship between corporate transparency levels with bankruptcy risk and dividend payouts. © 2015 Macmillan Publishers Ltd. 1741-3591.