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Increased disclosure and investment efficiency

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  • Shu-Miao Lai
  • Chih-Liang Liu
  • Taychang Wang

Abstract

This paper investigates the relation between increased disclosure level and capital investment efficiency. We hypothesize that increased disclosure level can reduce information asymmetry, which in turn improves capital investment efficiency. Consistent with our hypothesis, we document a significantly negative association between disclosure level and measures of inefficient investments, such as level of investment inefficiency, overinvestment, and underinvestment, indicating that firms increased disclosure level are found to improve investment efficiency. These results are robustness after using various measures for level of investment inefficiency and increased disclosure and considering different types of disclosure such as voluntary disclosure. Overall, our findings suggest that through reducing information asymmetry, increased disclosure level induces managers to act in the best interest of shareholders, which improves capital investment efficiency.

Suggested Citation

  • Shu-Miao Lai & Chih-Liang Liu & Taychang Wang, 2014. "Increased disclosure and investment efficiency," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 21(3), pages 308-327, September.
    • Handle: RePEc:taf:raaexx:v:21:y:2014:i:3:p:308-327
    DOI: 10.1080/16081625.2012.741791
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    3. Tong Sheng & Bingquan Fang & Xiaoqian Lu & Xingheng Shi & Chaohai Shen & Xiaolan Zhou, 2022. "The Relationship between Corporate Social Responsibility, Global Investment, and Equity Incentives," Sustainability, MDPI, vol. 14(23), pages 1-27, December.
    4. 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.
    5. Noha Elberry & Khaled Hussainey, 2021. "Governance Vis-à-Vis Investment Efficiency: Substitutes or Complementary in Their Effects on Disclosure Practice," JRFM, MDPI, vol. 14(1), pages 1-16, January.
    6. Jiong Wu & Feifei Wang & Xing Xu, 2021. "The influence of management team continuation on inefficient investment after family firms inheritance," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(1), pages 156-169, January.
    7. Amel Kouaib, 2022. "Corporate Sustainability Disclosure and Investment Efficiency: The Saudi Arabian Context," Sustainability, MDPI, vol. 14(21), pages 1-13, October.
    8. Shailesh Rastogi & Kuldeep Singh & Jagjeevan Kanoujiya, 2024. "Impact of Shareholders’ Activism on the Performance of Banks in India: A Panel Data Application," Business Perspectives and Research, , vol. 12(1), pages 83-99, January.
    9. Susi Susilawati & Titik Aryati & Vinola Herawaty, 2024. "Financial Reporting Quality, ESG and Prosperity Disclosure, and Investment Efficiency: The Role of Information Asymmetry (Moral Hazard Friction)," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 7, pages 142-160.
    10. Thi Thanh Huyen Le, 2018. "The Link between Information Transparency and Investment Efficiency: A Literature Review," Business and Economic Research, Macrothink Institute, vol. 8(4), pages 71-79, December.

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