Does information disclosure and transparency ranking system prevent the default risk of a firm?

Abstract

A non-financial information disclosure help prevents the default risk of firms. In addition to this point, the channels through the intermediate transmitting process may influence a firm’s default risk. Therefore, we use the regression method and examine listed companies that traded in the Taiwan stock market from 2005 to 2014. The results show that information disclosure significantly negatively affects default risk. Moreover, information transparency can ultimately impact a firm’s default risk via intermediate transmitting channels after considering endogeneity and checking robustness. Our findings suggest constructing full transparency of the information disclosure system will enhance market operations. Particularly, incorporating the laws into regularized information disclosure will improve efficient management and monitoring in the future.