This work verifies if companies with better accounting information show better performance and investigates the impact of better accounting information on the financial constraints. This study is based on an unbalanced panel data of 596 firms from seven Latin American countries between 1989 and 2009. The return on equity (ROE) and Market to book (MB) variables are used to define the firms' performance, which are regressed against five models that consider the quality of accounting information. We also investigate the relationship between financial constraint, measured by the KZ index, and accounting quality. The results support the view that earnings quality is an important factor to explain market and operational performance and aspects related to efficiency are important to determine the operational performance, but are not significant when market performance of Latin American firms are analyzed. When we model the firm's investment, the quality of accounting information appears to be a useful proxy to financial constraint. Moreover, the accounting quality plays a positive effect on investment that is a much more positive for unconstraint firms.
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