Scaling the Signal: How Firm Size Moderates the Effects of Financial Disclosures on Market and Value Metrics?

This study investigates the impact of key financial disclosures, i.e., leverage, liquidity, profitability, and investor management, on the short-term market reaction and long-term value of firms listed on the National Stock Exchange of India. Using panel data from 353 firms over a ten-year period (2014–2024), the analysis employs fixed-effects regression models to assess abnormal stock returns (one day post-disclosure) and future firm value (Tobin’s Q). The findings reveal that liquidity and profitability are consistently associated with positive market responses and enhanced firm valuation, while leverage and P/E-based investor metrics exhibit mixed or negative effects. Moreover, the study incorporates firm size as a moderating factor, showing that disclosure effects vary significantly between small and large firms. Notably, profitability and leverage have diminishing impact in larger firms, while liquidity’s positive effect is amplified. These insights not only confirm the relevance of signalling and agency theories in emerging markets but also underscore the conditional nature of disclosure interpretation. The study offers implications for corporate reporting strategies, investor analysis, and regulatory policy design.