| Issue |
SHS Web of Conferences
Volume 17, 2015
ICMETM 2015 - International Conference on Modern Economic Technology and Management
|
|
|---|---|---|
| Article Number | 01027 | |
| Number of page(s) | 10 | |
| Section | Economic and Industry | |
| DOI | https://doi.org/10.1051/shsconf/20151701027 | |
| Published online | 25 March 2015 | |
Financial Reporting Quality, Free Cash Flow, and Investment Efficiency
1 School of Management, Harbin Institute of Technology, Harbin, China, 150001
2 Said Business School, University of Oxford, Oxford, United Kingdom, OX1 5NY
a Corresponding author: zhibiao.zhu@hotmail.com
This paper based on the perspective of firm’s agency conflicts to examine the relationship between financial reporting quality and investment efficiency and to analyze the interaction effect between financial reporting and free cash flow on investment efficiency. We use 3,726 samples of Chinese listed firms during the period 2008–2012 to test the empirical models and find that financial reporting quality is negatively associated with both underinvestment and overinvestment. Further, we find that financial reporting quality is more strongly associated with overinvestment for firms with large free cash flow, which suggests that financial reporting quality can reduce information asymmetry arising from agency conflicts between the managers and investors. This paper extends the field of application of financial reporting quality and investment efficiency in the emerging capital markets in the world. Moreover, this is the first study that analyzes the interaction effect between financial reporting quality and free cash flow on investment efficiency.
Key words: financial reporting quality / free cash flow / investment efficiency / underinvestment / overinvestment
© Owned by the authors, published by EDP Sciences, 2015
This is an Open Access article distributed under the terms of the Creative Commons Attribution License 2.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Current usage metrics show cumulative count of Article Views (full-text article views including HTML views, PDF and ePub downloads, according to the available data) and Abstracts Views on Vision4Press platform.
Data correspond to usage on the plateform after 2015. The current usage metrics is available 48-96 hours after online publication and is updated daily on week days.
Initial download of the metrics may take a while.