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| Author: | Biddle, G.C. Hilary, G. Verdi, R.S. |
| Title: | How does financial reporting quality relate to investment efficiency? |
| Journal: | Journal of Accounting & Economics
2009 : DEC, VOL. 48:2-3, p. 112-131 |
| Index terms: | financial reporting capital investment disclosure efficiency empirical research |
| Language: | eng |
| Abstract: | Previous studies that higher-quality financial reporting improves capital investment efficiency leave unaddressed whether it reduces over- or under-investment. This paper presents that financial reporting quality is associated with lower over- and under-investment. Firms with higher financial disclosure quality are also found to deviate less from predicted investment levels and show less sensitivity to macro-economic conditions. The results present that one mechanism linking reporting quality and investment efficiency is a reduction of frictions as like as moral hazard and adverse selection that hamper efficient investment. |
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