How is Investment Efficiency Related to Investment Transparency?

Chen, Jianguo; Smith, Darnell; Wirth, Carolyn G.

doi:10.2139/ssrn.3005686

Cited by 6 publications

(14 citation statements)

References 46 publications

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“…Chen et al (2017a, b) investigate the bidirectional relationship between investment efficiency and investment transparency. They find no impact of investment transparency on investment efficiency; this contradicts the results of Biddle et al (2009) and Gomariz and Ballesta (2014), who suggest that financial reporting quality (FRQ) mitigates investment inefficiencies through reducing information asymmetry.…”

Section: Literature Reviewmentioning

confidence: 99%

Does corporate investment efficiency affect corporate disclosure practices?

Elberry

Hussainey

2020

JAAR

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PurposeThe authors examine the impact of corporate investment efficiency on corporate voluntary disclosure for a sample of UK non-financial companies.Design/methodology/approachThe authors use a sample of FTSE All-Share firms for the period of 2007–2014. Disclosure scores are collected from Corporate Financial Information Environment (CFIE). They follow Biddle et al. (2009) and Chen et al. (2011) in measuring corporate investment efficiency.FindingsThe authors find that high level of performance-related disclosure is associated with high level of corporate investment efficiency, while high level of good news information is associated with low level of corporate investment efficiency. They also find evidence on a bidirectional relation between disclosure and corporate investment efficiency.Research limitations/implicationsThe authors’ findings would be of importance to stakeholders and corporations. Stakeholders' investment decisions could be facilitated by understanding the disclosures provided by their firms and how these firms' performance is presented. Corporations become aware of the language which must be used to signal their performance.Practical implicationsCorporations become aware of the language which must be used in their disclosures. As firms may reflect their efficient investments but not in the form of good news in order to avoid revealing their competitive advantage to competitors.Originality/valueThis paper adds to disclosure studies by introducing a new variable, corporate investment efficiency, as a determinant of corporate disclosure practice.

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Section: Literature Reviewmentioning

confidence: 99%

Does corporate investment efficiency affect corporate disclosure practices?

Elberry

Hussainey

2020

JAAR

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“…An efficient investment policy can be defined as a policy in which all positive net present value (NPV) investments projects are identified, funded and implemented, while all negative NPV projects are rejected (Chen et al 2017). According to the investment opportunities theory, managers are able to maximize the market value of the firm by undertaking positive net present value projects (Miller & Modigliani, 1958).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…According to the investment opportunities theory, managers are able to maximize the market value of the firm by undertaking positive net present value projects (Miller & Modigliani, 1958). Accordingly, firms invest efficiently by pursuing capital investment opportunities when the marginal q > 1 (Chen et al 2017).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…The larger the size of the firm, the lower the value of the deviations from optimal investment levels and accordingly, a direct effect is expected on the efficiency of investment (Biddle et al 2009, Mohammadi 2017 Firm age: Is measured by natural log of firm years (Chen et al 2017).…”

Section: Control Variablesmentioning

confidence: 99%

“…This study predicts that Big4 has a positive association with investment efficiency. Big4 is a binary variable that takes the value 1 if the company is audited by at least one Big4 audit firm and 0 otherwise (Biddle et al 2009, Rad et al 2016 MTB: This variable is used to proxy for the firm's growth opportunities (Chen et al 2017). It is computed by dividing the market value of equity which equals the number of common shares outstanding on the financial statement date multiplied by the market value per share on the same date by the book value of equity at end of the year (Biddle et al 2009, Rad et al 2016 Empirical Results:…”

Section: Control Variablesmentioning

confidence: 99%

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جودة التقاریر المالیة کمحدد للعلاقة بین القیود المالیة وکفاءة الاستثمارات-دراسة تجریبیة علی الشرکات غیر المالیة المقیدة فی سوق الأوراق المالیة المصری (باللغة الإنجلیزیة)

رمضان¹

2017

مجلة الاسکندریة للبحوث المحاسبیة

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This paper is based on the perspective of firm's agency conflicts to examine the relationship between financial constraints on one hand measured by a composite score that encompasses the firm's cash balance scaled by total assets and the firm's negative capital structure and investment efficiency on the other. To reduce measurement errors, financial reporting quality which serves as the moderating factor in this relationship is measured by several proxies as there is no single well defined measure for this variable. A sample of 234 nonfinancial firms listed in the Egyptian stock market during the period 2013-2016 is used to test the empirical models through regression analysis. Results agreed with previous studies regarding the effect of financial reporting quality on investment efficiency and study was able to provide empirical evidence regarding the positive effect of financial reporting quality on the efficiency of investment. However, with respect to the effect of financial constraints and the interactive effect of financial constraints and financial reporting quality on the efficiency of investments, results ran counter to the researcher's predictions as a significant negative effect was found between these two variables and the dependent variable which is the efficiency of investment which raises several questions concerning earnings management practices by management of firms listed in Egyptian stock Exchange showing no concern with financial reporting quality. Such a relationship appeared to be more obvious for overinvesting firms compared to their underinvesting counterparts even though the number of underinvesting firms in the sample was much more greater than their overinvesting counterparts which emphasizes these results and shows that as long as management finds the internal funds available, they are not concerned with improving the quality of their financial reports. This paper extends the accounting literature concerning financial reporting quality and investment efficiency to the emerging capital markets in the world. Moreover, this is the first study that examines the interaction effect between financial reporting quality and financial constraints, taking financial constraints as an independent variable on listed companies in Egypt.

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