The impact of financial reporting quality and debt maturity on investment efficiency: The case study in Viet Nam
Main Article Content
Abstract
This artical studies about the impact of the quality of financial reporting (FRQ) and debt maturity, represented by short-term debt to investment efficiency of Vietnamese enterprises. The authors study this effect in the state of over-investment and under-investment on a sample of 105 non-financial corporations, listed on the HNX and HOSE in Vietnam in the period from 2009 to 2017. Since the financial statement is a useful tool for assessing the financial situation of enterprises in comparision with other competitors, the analysis of the quality of financial statements is quite important in investment decision of the managers. The results show that when the quality of financial reports increase and use more short-term debt, it will help enterprises improve their investment efficiency, enhance the investment problem and the investment situatation below the capacity in Vietnam. In addition, the artical also examines the relationship between the quality of financial reporting and investment efficiency of enterprises at various debt maturities.
Article Details
Keywords
the quality of financial reporting, investment efficiency, debt maturity
References
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Altman, E. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23, 589-609.
Ball, R., & Shivakumar, L. (2005). Earnings quality in UK private firms: comparative loss recognition timeliness. Journal of Accounting and Economics, 39, 83-128.
Bertrand, M., & Mullainathan, S. (2003). Enjoying the quiet life? Corporate governance and managerial preference. Journal of Political Economy, 111, 1043-1075.
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Biddle, G., Hilary, G., & Verdi, R. S. (2009). How does financial reporting quality relate to investments efficiency? Journal of Accounting and Economics, 48, 112-131.
Bushman, R. M., & Smith, A. J. (2001). Financial accounting information and corporate governance. Journal of Accounting and Economics, 32, 237-333.
Chen, F., Hope, O., Li, Q., & Wang, X. (2011). Financial reporting quality and investment efficiency of private firms in emerging markets. The Accounting review, 86, 1255-1288.
Childs, P. D., Mauer, D. C., & Ott, S. H. (2005). Interactions of corporate financing and investment decisions: the effects of agency conflicts. Journal of Financial Economics, 76, 667-690.
Crotty, J. R. (1992). Neoclassical and Keynesian approaches to the theory of investment. Journal of Post Keynesian Economics, 14, 483-496.
Dechow, P., & Dichev, I. (2002). The quality of accruals and earnings: the role of accrual estimation errors. The Accounting review, 77, 35-59.
Diamond, D. W. (1991). Debt maturity structure and liquidity risk. Quarterly Journof Economics, 106, 709-737.
D’Mello, R., Miranda, M. (2010). Long-term debt and overinvestment agency problem. Journal of Banking and Finance, 34, 324–335.
Flannery, M. J. (1986). Asymmetric information and risky debt maturity choice. Journal of Finance, 41, 19-37.
García-Lara, J. M., García-Osma, B., & Penalva, F. (2010). Accounting conservatism and firm investment efficiency. Working Paper.
Gomariz, M. F. C., & Ballesta, J. P. S. (2013). Financial reporting quality, debt maturity and investment efficiency. Journal of Banking & Finance, 40, 494-506.
Gordon, M. J. (1992). The Neoclassical and a Post Keynesian Theory of Investment. Journal of Post Keynesian Economics, 14(4), 425-443.
Guedes, J., & Opler, T. (1996). The determinants of the maturity of corporate debt issues. The Journal of Finance, 51, 1809-1833.
Hayashi, F. (1982). Tobin’s marginal q and average q: a neoclassical interpretation. Econometrica, 50(1), 213-224.
Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: a review of the empirical disclosure literature. Journal of Accounting and Economics, 31, 405-440.
Hope, O., & Thomas, W. B. (2008). Managerial empire building and firm disclosure. Journal of Accounting Research, 46, 591-626.
Hubbard, R. G. (1998). Capital-market imperfections and investment. Journal of Economic Literature, 36, 193-225.
Jensen, M., & Meckling, W. H. (1976). Theory of the firm: managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3, 305-360.
Jensen, M. (1986). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, 76, 323–329.
Jones, J. (1991). Earnings management during import relief investigations. Journal of Accounting Research, 29, 193-228.
Kasznik, R. (1999). On the association between voluntary disclosure and earnings management. Journal of Accounting Research, 37, 57-81.
Lai, K. W. (2011). The cost of debt when all-equity firms raise finance: the role of investment opportunities, audit quality and debt maturity. Journal of Banking and Finance, 35, 1931-1940.
Lambert, R., Leuz, C., & Verrecchia, R. (2007). Accounting information, disclosure, and the cost of capital. Journal of Accounting Research, 45, 385-420.
Leuz, C., Nanda, D., & Wysocki, P. D. (2003). Earnings management and investor protection: an international comparison. Journal of Financial Economics, 69, 505-527.
Magri, S. (2010). Debt maturity choice of nonpublic Italian firms. Journal of Money, Credit and Banking, 42(2-3), 443-463.
McNichols, M., & Stubben, S. (2008). Does earnings management affect firms investment decisions. The Accounting review, 86, 1571-1603.
Myers, S. C. (1977). Determinants of corporate borrowing. Journal of Financial Economics, 5, 147-175.
Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13, 187-221.
Ortiz-Molina, H., & Penas, M. F. (2008). Lending to small businesses: the role of the loan maturity in addressing information problems. Small Business Economics, 30, 361-383.
Parrino, R., & Weisbach, M. S. (1999). Measuring investment distortions arising from stockholder– bondholder conflicts. Journal of Financial Economics, 53, 3-42.
Rajan, R.G. (1992). Insiders and outsiders: the choice between informed and arm’s-length debt. The Journal of Finance, 47, 1367–1400.
Saghafi, A., & Motamedi Fazel, M. (2012). Relation between audit quality and investment efficiency in firms with high investment opportunities. Journal of Financial Accounting Research, 3(4), 1-14.
Stiglitz, J., & Weiss, A. (1981). Credit rationing in markets with imperfect information. American Economic Review, 71, 393-410.
Yoshikawa, H. (1980). On the “q” theory of investment. American Economic Review, 70, 739-743.
Altman, E. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23, 589-609.
Ball, R., & Shivakumar, L. (2005). Earnings quality in UK private firms: comparative loss recognition timeliness. Journal of Accounting and Economics, 39, 83-128.
Bertrand, M., & Mullainathan, S. (2003). Enjoying the quiet life? Corporate governance and managerial preference. Journal of Political Economy, 111, 1043-1075.
Biddle, G., & Hilary, G. (2006). Accounting quality and firm-level capital investment. The Accounting review, 81, 963-982.
Biddle, G., Hilary, G., & Verdi, R. S. (2009). How does financial reporting quality relate to investments efficiency? Journal of Accounting and Economics, 48, 112-131.
Bushman, R. M., & Smith, A. J. (2001). Financial accounting information and corporate governance. Journal of Accounting and Economics, 32, 237-333.
Chen, F., Hope, O., Li, Q., & Wang, X. (2011). Financial reporting quality and investment efficiency of private firms in emerging markets. The Accounting review, 86, 1255-1288.
Childs, P. D., Mauer, D. C., & Ott, S. H. (2005). Interactions of corporate financing and investment decisions: the effects of agency conflicts. Journal of Financial Economics, 76, 667-690.
Crotty, J. R. (1992). Neoclassical and Keynesian approaches to the theory of investment. Journal of Post Keynesian Economics, 14, 483-496.
Dechow, P., & Dichev, I. (2002). The quality of accruals and earnings: the role of accrual estimation errors. The Accounting review, 77, 35-59.
Diamond, D. W. (1991). Debt maturity structure and liquidity risk. Quarterly Journof Economics, 106, 709-737.
D’Mello, R., Miranda, M. (2010). Long-term debt and overinvestment agency problem. Journal of Banking and Finance, 34, 324–335.
Flannery, M. J. (1986). Asymmetric information and risky debt maturity choice. Journal of Finance, 41, 19-37.
García-Lara, J. M., García-Osma, B., & Penalva, F. (2010). Accounting conservatism and firm investment efficiency. Working Paper.
Gomariz, M. F. C., & Ballesta, J. P. S. (2013). Financial reporting quality, debt maturity and investment efficiency. Journal of Banking & Finance, 40, 494-506.
Gordon, M. J. (1992). The Neoclassical and a Post Keynesian Theory of Investment. Journal of Post Keynesian Economics, 14(4), 425-443.
Guedes, J., & Opler, T. (1996). The determinants of the maturity of corporate debt issues. The Journal of Finance, 51, 1809-1833.
Hayashi, F. (1982). Tobin’s marginal q and average q: a neoclassical interpretation. Econometrica, 50(1), 213-224.
Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: a review of the empirical disclosure literature. Journal of Accounting and Economics, 31, 405-440.
Hope, O., & Thomas, W. B. (2008). Managerial empire building and firm disclosure. Journal of Accounting Research, 46, 591-626.
Hubbard, R. G. (1998). Capital-market imperfections and investment. Journal of Economic Literature, 36, 193-225.
Jensen, M., & Meckling, W. H. (1976). Theory of the firm: managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3, 305-360.
Jensen, M. (1986). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, 76, 323–329.
Jones, J. (1991). Earnings management during import relief investigations. Journal of Accounting Research, 29, 193-228.
Kasznik, R. (1999). On the association between voluntary disclosure and earnings management. Journal of Accounting Research, 37, 57-81.
Lai, K. W. (2011). The cost of debt when all-equity firms raise finance: the role of investment opportunities, audit quality and debt maturity. Journal of Banking and Finance, 35, 1931-1940.
Lambert, R., Leuz, C., & Verrecchia, R. (2007). Accounting information, disclosure, and the cost of capital. Journal of Accounting Research, 45, 385-420.
Leuz, C., Nanda, D., & Wysocki, P. D. (2003). Earnings management and investor protection: an international comparison. Journal of Financial Economics, 69, 505-527.
Magri, S. (2010). Debt maturity choice of nonpublic Italian firms. Journal of Money, Credit and Banking, 42(2-3), 443-463.
McNichols, M., & Stubben, S. (2008). Does earnings management affect firms investment decisions. The Accounting review, 86, 1571-1603.
Myers, S. C. (1977). Determinants of corporate borrowing. Journal of Financial Economics, 5, 147-175.
Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13, 187-221.
Ortiz-Molina, H., & Penas, M. F. (2008). Lending to small businesses: the role of the loan maturity in addressing information problems. Small Business Economics, 30, 361-383.
Parrino, R., & Weisbach, M. S. (1999). Measuring investment distortions arising from stockholder– bondholder conflicts. Journal of Financial Economics, 53, 3-42.
Rajan, R.G. (1992). Insiders and outsiders: the choice between informed and arm’s-length debt. The Journal of Finance, 47, 1367–1400.
Saghafi, A., & Motamedi Fazel, M. (2012). Relation between audit quality and investment efficiency in firms with high investment opportunities. Journal of Financial Accounting Research, 3(4), 1-14.
Stiglitz, J., & Weiss, A. (1981). Credit rationing in markets with imperfect information. American Economic Review, 71, 393-410.
Yoshikawa, H. (1980). On the “q” theory of investment. American Economic Review, 70, 739-743.