How Does Financial Reporting Quality Relate to Investment Efficiency?

Gilles Hilary, Gary C. Biddle and Rodrigo S. Verdi

Post-Print from HAL

Abstract: Prior evidence that higher quality financial reporting improves capital investment efficiency leaves unaddressed whether it reduces over- or under-investment. This study provides evidence of both in documenting a conditional negative (positive) association between financial reporting quality and investment for firms operating in settings more prone to over-investment (under-investment). Firms with higher financial reporting quality also are found to deviate less from predicted investment levels and show less sensitivity to macroeconomic conditions. These results suggest that one mechanism linking reporting quality and investment efficiency is a reduction of frictions such as moral hazard and adverse selection that hamper efficient investment.

Keywords: Financial Reporting Quality; Investment Efficiency; Accounting Quality; Adverse Selection; Moral Hazard (search for similar items in EconPapers)
Date: 2009-12-01
References: Add references at CitEc
Citations: View citations in EconPapers (637)

Published in Journal of Accounting and Economics, 2009, vol.48, n°2/3, pp.112-131. ⟨10.1016/j.jacceco.2009.09.001⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: How does financial reporting quality relate to investment efficiency? (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00481731

DOI: 10.1016/j.jacceco.2009.09.001

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().