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Does accounting conservatism affect firm investment efficiency in an emerging market? Evidence from Tunisian context

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  • Asma Houcine

Abstract

Accounting conservatism is one of the most pervasive characteristics of financial reporting and one of the most influential accounting principles. At the same time, the efficiency of investment is a key to the existence and development of a firm. Therefore, how the conservative accounting policy influences the efficiency of a firm's investment deserves deep research. Prior studies have shown that accounting conservatism acts as a governance mechanism that increase capital allocation efficiency by facilitating the monitoring of managers' investment decisions and improving a firm's information environment and its access to external financing at lower cost, thereby prevents firms' overinvestment and underinvestment. These studies use predominantly US data. Thus, it is worth to question if the results can be extended to an emerging economy. Focusing on the case of Tunisia, we argue that particularities of governance system of an emerging economy, could constrain the monitoring and the informational roles of conservatism. Consisting with our prediction, we find that conservatism has no significant effect on firms' investment efficiency in Tunisian market.

Suggested Citation

  • Asma Houcine, 2013. "Does accounting conservatism affect firm investment efficiency in an emerging market? Evidence from Tunisian context," African Journal of Accounting, Auditing and Finance, Inderscience Enterprises Ltd, vol. 2(3), pages 209-232.
    • Handle: RePEc:ids:ajaafi:v:2:y:2013:i:3:p:209-232
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    Cited by:

    1. Houcine, Asma, 2017. "The effect of financial reporting quality on corporate investment efficiency: Evidence from the Tunisian stock market," Research in International Business and Finance, Elsevier, vol. 42(C), pages 321-337.
    2. Mahdi Salehi & Grzegorz Zimon & Arash Arianpoor & Fatemeh Eidi Gholezoo, 2022. "The Impact of Investment Efficiency on Firm Value and Moderating Role of Institutional Ownership and Board Independence," JRFM, MDPI, vol. 15(4), pages 1-13, April.
    3. Riris Rotua Sitorus & Etty Murwaningsari, 2019. "Do Quality of Financial Reporting and Tax Incentives Effect on Corporate Investment Efficiency with Good Corporate Governance as Moderating Variables?," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 6(1), pages 27-35.

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