Improving investment efficiency through financial reporting quality in emerging markets
Ilker Yilmaz & Haitham Nobanee
What the paper says
Purpose This study explores the impact of financial reporting quality (FRQ) on firm-level investment efficiency in emerging markets. Design/methodology/approach Using a sample of 6,468 firms from 14 emerging countries over a period from 2007 to 2021, we run pooled ordinary least square (OLS) regressions, panel regressions and generalized method of moments (GMM) regressions to investigate the relationship. Findings We find a positive and significant relationship between FRQ and investment efficiency. This suggests that improved financial disclosures help firms achieve optimal investment levels, potentially mitigating under- or over-investment problems. The findings hold true across various analyses, including pooled OLS, fixed-effects panel regressions and GMM regressions. Practical implications Our results offer valuable insights for corporate managers, policymakers and financial statement users, as higher FRQ can lead to more efficient resource allocation, improved information transparency and, ultimately, positive effects on firm value. Originality/value The study presents fresh and novel empirical evidence on the topic by using a large sample of emerging countries. We have reported the results for the whole sample and also at country and industry breakdowns.
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.50 × 0.4 = 0.20 |
| M · momentum | 0.50 × 0.15 = 0.07 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.