IDEAS home Printed from https://ideas.repec.org/a/bco/ncafaa/v11y2024p29-53.html
   My bibliography  Save this article

Financial Reporting Quality, CEO Age, and Investment Efficiency: Evidence from the U.S. Market

Author

Listed:
  • Zhewen Li

    (Adam Smith Business School, University of Glasgow, United Kingdom)

  • Konstantinos A. Athanasiadis

    (Ph.D. Candidate Birkbeck University, London, MCMI, LDSS, UK Lecturer in Strategic Management, University of Hertfordshire, UK)

  • Michail I. Fygkioris

    (PhD Candidate at the University of Macedonia, Greece)

  • Dimitrios N. Koufopoulos

    (V Professor, School of Law, CCLS, Queen Mary University, England)

Abstract

Financial Reporting Quality (FRQ) is crucial for the accurate representation of a companys financial performance and position. Corporate documentation, such as annual reports, is used by managers to enhance their investment decisions. Better reporting could improve the investment decisions of managers, thus improving the Investment Efficiency (IE) of the company, avoiding both overinvestment and underinvestment. This study examines the impact of financial reporting quality on the firms' investment efficiency using accounting and stock data for U.S. listed firms from 2010 to 2022. The data were acquired through CRSP, Compustat and BoardEx databases. Our final sample consists of 10,350 firms yielding 70,939 firm-to-year observations. We adopted the Chen et al. (2011) approach defining FRQ and Biddle et al. (2009) for IE. Our results show that financial reporting quality is positively related to investment efficiency and that this positive effect is more pronounced in firms with aged CEOs. The study conducts robustness checks on these results by utilizing alternative empirical models. The results lend support to the theory by Biddle et al. (2009), suggesting that firms with high reporting quality are less likely to overinvest or underinvest. Moreover, this study extends the research by demonstrating that CEO age has an enhancing effect on the impact of financial reporting quality (FRQ) on investment efficiency (IE).

Suggested Citation

  • Zhewen Li & Konstantinos A. Athanasiadis & Michail I. Fygkioris & Dimitrios N. Koufopoulos, 2024. "Financial Reporting Quality, CEO Age, and Investment Efficiency: Evidence from the U.S. Market," New Challenges in Accounting and Finance, EUROKD, vol. 11, pages 29-53.
    • Handle: RePEc:bco:ncafaa::v:11:y:2024:p:29-53
    DOI: 10.32038/NCAF.2024.11.03
    as

    Download full text from publisher

    File URL: https://api.eurokd.com/Uploads/Article/1305/NCAF.2024.11.03.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.32038/NCAF.2024.11.03?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bco:ncafaa::v:11:y:2024:p:29-53. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sara Gunen (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.