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A Methodology for Corporate Transparency Evaluation Applied to Brazilian Companies: Legal X Voluntary Information

This paper presents a methodology for measuring the level of transparency based on information available in corporate investor relations websites. The methodology has four steps: the first step consists of identifying a list of 99 items corresponding to information elements that companies are expected to disclose through their investor relations websites. The second step checks the existence and quality of each of these information elements in the websites. The quality is measured considering the aspects of easy access, updating and completeness of the information. The third step comprises the attribution of weights to the information items considering the nature of the requirement of the information (whether it is legal, regulatory, good market practice or academic recommendation) and its relevance to decision-making of shareholders and investors. Professionals with a broad market vision perform this third step. The transparency index is calculated in the fourth step. The methodology is applied to a sample of Brazilian companies. The paper contributes presenting a methodology to assist the discussion about the importance of transparency and its connection with the increase of value for shareholders and for society. The methodology allows us to verify that transparency is dependent on the level of legal enforcement and that some companies have more voluntary transparency than others.