Filipino stock investors value transparent firms

Listed companies should be accountable, fair and transparent in dealing with stakeholders if they want to increase their value among investors. Filipino stock investors are particularly conscious of disclosure practices, which form part of firms’ corporate governance structure, a Philippine Stock Exchange (PSE) study showed. “Firm valuation is positively associated with a higher level of mandatory disclosure. Evidence shows that investors reward Philippine firms for disclosing more than what is required," the bourse said in a statement. It added that Filipino investors are most concerned about corporate governance issues related to equitable treatment of shareholders, disclosure and transparency, and board responsibilities. Jonathan Juan Moreno, head of the PSE’s Corporate Governance Office, said empirical proof about the relationship between corporate governance and company value would help them push the governance reform agenda more actively. “We have long promoted corporate governance by arguing on the legal and moral case. This study helped us prove that there is a business case for [it]," he pointed out. Corporate governance is the framework of rules and practices by which a company's board ensures accountability, fairness and transparency in its relationship with stakeholders — financiers, customers, management, employees, the government and community. Corporate disclosures, a big part of corporate governance, are generally believed to be a good thing because a clear and timely announcement helps stakeholders of the company and other market participants make informed decisions about their investments. Critics have often noted that listed companies choose not to divulge corporate developments — if they can get away with it. And while they are supposed to make companies more transparent, disclosure rules have provided too much leeway for companies to hide behind jargon. PSE President and Chief Executive Officer Francis Lim said they were encouraged by the results of the study. "These findings prove that investors value corporate governance practices, as well as affirm the PSE’s direction of promoting good corporate governance practices in listed companies," he said. The PSE study looked at the correlation between disclosure and corporate governance practices and company value using a time series of corporate governance index values for listed Philippine firms covering the period 2005 to 2008. Corporate governance expert Stephen Cheung of the Hong Kong Baptist University was commissioned to conduct the study funded by a grant from the British government. — GMANews.TV