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

Hanif Putra Ardianto, Iman Harymawan, Yuanita Intan Paramitasari, Mohammad Nasih

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.

Keywords

financial reporting quality; investment efficiency; underinvestment; overinvestment

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References

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