Firms’ Investment Level and (In)Efficiency: The Role of Accounting Information System Quality

Cláudia Pereira (), Beatriz Castro, Luís Gomes and Helena Canha
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Cláudia Pereira: CEOS.PP, ISCAP, Polytechnic of Porto, 4465-004 Porto, Portugal
Beatriz Castro: ISCAP, Polytechnic of Porto, Financial Accounting, 4465-004 Porto, Portugal
Luís Gomes: CEOS.PP, ISCAP, Polytechnic of Porto, 4465-004 Porto, Portugal
Helena Canha: ISCAP, Polytechnic of Porto, Financial Accounting, 4465-004 Porto, Portugal

IJFS, 2024, vol. 12, issue 1, 1-16

Abstract: We investigate whether accounting information system quality has an impact on the level and efficiency of firms’ investments. While firms’ growth depends on investment and financing decisions, accounting information is fundamental for the decision-making of several stakeholders. We assess the accounting information system quality by discretionary accruals, whereas the investment inefficiency is estimated by the residuals of an investment regression for a sample of 3073 Portuguese SMEs from 27 industries, over the period from 2016 to 2021 using a panel regression analysis. The empirical evidence suggests that firms exhibiting higher accounting information system quality tend to invest more. In addition, firms with a lower accounting information system quality have more inefficient investments, as they tend to engage in more overinvestment, although this is not significant for underinvestment. Therefore, this study provides new evidence regarding the impact of accounting information systems on investment that may be useful for several stakeholders, such as managers, creditors, regulators, and academics, by providing evidence for SMEs, where empirical studies are scarce.

Keywords: accounting information system quality; accruals; investment efficiency; overinvestment; underinvestment (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2024
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