Financial Reporting Quality and Investment Efficiency: Evidence from Indonesian Stock Market

Hanif Putra Ardianto, Iman Harymawan, Yuanita Intan Paramitasari and Mohammad Nasih
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Hanif Putra Ardianto: Universitas Airlangga, Surabaya, Indonesia
Iman Harymawan: Universitas Airlangga, Surabaya, Indonesia
Yuanita Intan Paramitasari: Universitas Airlangga, Surabaya, Indonesia
Mohammad Nasih: Universitas Airlangga, Surabaya, Indonesia

Economics and Finance in Indonesia, 2020, vol. 66, 112-122

Abstract: This study aims to analyze the impact of financial reporting quality on the investment efficiency of a company. The study uses 994 observations from companies listed on the Indonesia Stock Exchange (IDX) in three periods from 2013 to 2015. The findings suggest that higher financial reporting quality has a positive and significant relationship with investment efficiency. Furthermore, the tests were conducted on groups of companies experiencing underinvestment and overinvestment. It was found that higher financial reporting quality had a negative and significant relationship with companies experiencing overinvestment. The findings provide implications for investors in assessing investment management carried out by company.

Keywords: financial reporting quality; investment efficiency; underinvestment; overinvestment (search for similar items in EconPapers)
JEL-codes: G31 G32 M41 (search for similar items in EconPapers)
Date: 2020
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