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Financial Reporting Quality and Investment Efficiency: Evidence from Indonesian Stock Market

Author

Listed:
  • Hanif Putra Ardianto

    (Universitas Airlangga, Surabaya, Indonesia)

  • Iman Harymawan

    (Universitas Airlangga, Surabaya, Indonesia)

  • Yuanita Intan Paramitasari

    (Universitas Airlangga, Surabaya, Indonesia)

  • Mohammad Nasih

    (Universitas Airlangga, Surabaya, Indonesia)

Abstract

This study aims to analyze the impact of financial reporting quality on the investment efficiency of a company. The study uses 994 observations from companies listed on the Indonesia Stock Exchange (IDX) in three periods from 2013 to 2015. The findings suggest that higher financial reporting quality has a positive and significant relationship with investment efficiency. Furthermore, the tests were conducted on groups of companies experiencing underinvestment and overinvestment. It was found that higher financial reporting quality had a negative and significant relationship with companies experiencing overinvestment. The findings provide implications for investors in assessing investment management carried out by company.

Suggested Citation

  • Hanif Putra Ardianto & Iman Harymawan & Yuanita Intan Paramitasari & Mohammad Nasih, 2020. "Financial Reporting Quality and Investment Efficiency: Evidence from Indonesian Stock Market," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 66, pages 112-122, Desember.
    • Handle: RePEc:lpe:efijnl:202009
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    References listed on IDEAS

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    More about this item

    Keywords

    financial reporting quality; investment efficiency; underinvestment; overinvestment;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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