Transparency International recently ranked the world's largest companies based upon their degree of transparency in corporate reporting of anti-corruption measures, country-by-country financial data reporting, and organizational transparency. As indicated in its report, these companies are worth trillions of dollars and affect millions of people around the globe. The greater the degree of transparency, the more information stakeholders have about a company's operations, revenues, profits, and taxation on which to make decisions and influence corporate behavior.

It made us wonder: do investors reward such transparency? As a simple and quick check on this issue, we use the scores that Transparency International assigns to 80 companies head-quartered in 19 countries; the higher the score, the greater the degree of transparency. The scores range from a low of 1.1 for Bank of China to a high of 8.3 for Norway's Statoil. The average score is 4.8 out of 10, with 41 companies scoring at or higher than the average and the remaining 39 scoring lower. Of the companies, 24 are financial companies with an average score of 4.2.

To assess the market's view of the value of this particular type of transparency, we looked at the ratio of the market value of a company to its book value and then compared it to the company's transparency score.

The findings? For transparency scores less than 5.1, the market does indeed reward companies with greater transparency, since the market to book value ratio increases along with a higher score. That is, investors are willing to pay higher premiums for equity in more transparent firms.

Yet for transparency scores above 5.1, the relationship turns negative. That is, the ratio of market to book value declines with still higher scores at ever higher levels of transparency, investors pay less of a premium.

Why would this be? Assessing the impact of transparency on the market value of a company is of course quite difficult. There are many important factors that affect market value beyond simply the degree of transparency regarding a companys anti-corruption measures. That being said, one could speculate that transparency up to the inflection point is rewarded because some information about these measures is crucial to avoid criminal or civil penalties and investors will pay more for stock in such a company. Then again, it might be the case that too much disclosure aides a companys competitors, as well as imposes extra costs without offsetting gains in terms of avoiding penalties. The bottom line is that more empirical work is sorely needed to assess the costs and benefits of transparency.