Does audit quality affect firms’ investment efficiency?

Boubaker, Sabri; Houcine, Asma; Ftiti, Zied; Masri, Hatem

doi:10.1080/01605682.2018.1489357

Cited by 60 publications

(83 citation statements)

References 62 publications

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“…In Eastern European countries, Cherkasova and Rasadi (2017) show that a higher earnings quality mitigates both overinvestment and underinvestment issues. Recently, Boubaker et al (2018) investigate the role of audit quality on corporate investment efficiency. They show that an external auditor affects negatively the managerial investment inefficiency.…”

Section: Literature Review and Hypotheses 21 Earnings Management And Corporate Investment Efficiencymentioning

confidence: 99%

Earnings management and corporate investment efficiency: does the board of directors matter?

Bzeouich

Lakhal

Dammak

2019

JFRA

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PurposeThe purpose of this paper is to examine the relationship between earnings management and the efficiency of French firms’ investments. It also investigates the moderating effect of board of directors’ features on this relation.Design/methodology/approachThis study is based on a sample of French listed companies from 2011 to 2015, i.e. 435 firm-year observations. The authors use the instrumental variable method based on 2SLS models.FindingsThe authors show that there is a negative relationship between earnings management and investment efficiency. This finding supports the theoretical perspective of the agency theory, as the propensity of firms to engage in earnings management practices is associated with high managerial opportunistic behavior and asymmetric information issues, leading to the problem of under and overinvestment. The findings also show that board size, independence and gender diversity are positively associated with investment efficiency. These board features moderate the relationship between earnings management and investment efficiency suggesting that earnings quality plays a more prominent role in guiding managers to choose the right investments when the corporate governance environment is strong.Research limitations/implicationsThe negative relationship between earnings management and investment efficiency suggests that firms with lower earnings quality are exposed to high information asymmetries. They are then more likely to deviate from their expected level of investments. In addition, the results highlight the importance of corporate financial transparency and board monitoring to reduce agency costs and ensure the efficiency of corporate investments, particularly in a setting where investors’ interests are poorly protected.Originality/valueThis paper is the first to the best of the authors’ knowledge to examine the effect of earnings management, a metric for earnings quality, on the corporate investment efficiency in France. Besides, they extend previous literature by investigating how board features are able to monitor managerial actions and decisions and therefore to moderate the effect of earnings management on investment efficiency.

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Section: Literature Review and Hypotheses 21 Earnings Management And Corporate Investment Efficiencymentioning

confidence: 99%

Earnings management and corporate investment efficiency: does the board of directors matter?

Bzeouich

Lakhal

Dammak

2019

JFRA

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“…Indeed, the results of the models are sensitive to these choices. An interested reader could refer to Botti et al (2014) and Boubaker et al (2018). Another limitation is the static nature of the DEA models.…”

Section: Discussionmentioning

confidence: 99%

Relative Efficiency of Canadian Banks: A Three-Stage Network Bootstrap DEA

Dia

Golmohammadi

Takouda

2020

JRFM

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In this study, we focus on how banks can enhance their efficiency in the utilization of resources to ensure their economic sustainability. We propose a novel three-stage (production, investment, and revenue generation) network Data Envelopment Analysis (DEA) with bootstrapping to evaluate the performance of the six big Canadian banks for the period 2000-2017, amid the 2007 financial crisis and the increasing competition level due to new technologies. We identify the best practices in each stage that can be used as benchmarks by other banks to improve their economic sustainability. Our results indicate that the 2007 financial crisis resulted in lower efficiencies in the performance of Canadian banks. This decline was not substantial for the production and investment stages when the revenue generation stage received the greatest hit. In addition, we observed that the individual banks did not have consistent performance in the different stages. Finally, we compared our model with the black box DEA model and concluded that the network DEA provides more insightful and accurate results in terms of banks' efficiencies.

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“…Furthermore, the DEA method has also received much attention in studying the efficiency of firms in financial services such as stock markets, insurance, pension funds, mutual funds, risk tolerance, and corporate failure prediction (Boubaker et al 2018(Boubaker et al , 2021Paradi et al 2017;Vidal-García et al 2018). 2 In DEA, the efficiency of a bank/banking system, or the so-called Decision-Making Unit (DMU), is estimated as its ability to transform inputs into outputs.…”

Section: First Stage: Estimating the Efficiency Of Banking Systemsmentioning

confidence: 99%

Fintech Credit and Bank Efficiency: International Evidence

Nguyen

et al. 2021

IJFS

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The expansion of fintech credit around the world is challenging the global banking system. This study investigates the interrelationships between the development of fintech credit and the efficiency of banking systems in 80 countries from 2013 to 2017. The findings indicate a two-way relationship between them. More specifically, a negative relationship between bank efficiency and fintech credit implies that fintech credit is more developed in countries with less efficient banking systems. Meanwhile, a positive impact of fintech credit on the efficiency of banking systems suggests that fintech credit may serve as a wake-up call to the banking system. Therefore, fintech credit should be encouraged by the authorities around the world.

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Does audit quality affect firms’ investment efficiency?

Cited by 60 publications

References 62 publications

Earnings management and corporate investment efficiency: does the board of directors matter?

Earnings management and corporate investment efficiency: does the board of directors matter?

Relative Efficiency of Canadian Banks: A Three-Stage Network Bootstrap DEA

Fintech Credit and Bank Efficiency: International Evidence

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