Impact of financial reporting quality on labour investment efficiency for Indian firms

This paper measures the environmental efficiency of the grossly polluting Indian leather industry which faces stringent environmental regulations. The environmental efficiency measure accounts for associated bad outputs (total suspended solids and chromium) with the good output (leather products) of firms and hence, provides an important benchmark for improving environmental performance. Drawing data from fieldwork in the Kanpur industry of India, the study estimates efficiency using the directional distance function approach under three directional vectors. The results reveal that the efficiency of firms is underestimated when bad outputs are omitted in the production technology. There is significant potential to increase leather production and reduce pollutants across firms. The study confirms that regulation improves the environmental efficiency of leather firms. However, regulation imposes an opportunity cost on firms of an average 3% loss in expanding leather output and reducing inputs. The study recommends mandating the use of cleaner technology and market-based instruments to improve environmental efficiency.

This study investigates the impact of female directors (FDs) on investment efficiency in a competitive environment. Considering Chinese market, where corporate governance practices are weaker than other developed countries and empirical evidence regarding the role of female directors in shaping investment efficiency is absent, this study fills this gap by studying the role of the female directors in investment efficiency in a competitive environment. The results show that FDs improve the investment efficiency in the firms as they play a monitoring role, discipline the management, reduce agency problem, and improve efficient allocation of resources. The results also exhibit that FDs significantly curb the overinvestment problem. However, FDs do not play a significant role in reducing underinvestment problem. The study facilitates to understand the factors that help in efficient allocation of resources in an economy. This study can be helpful for the policymakers while devising corporate policies to promote and encourage gender diversity in higher management.

PurposeExtensive macro- and micro-economics research has been conducted on China's tax reform, which replaced business tax with value-added tax (VAT). However, existing studies have not clarified the reform's impact on firm-level investment decisions. Hence, this study explored the effect of replacing business tax with VAT on firms' investment efficiency.Design/methodology/approachThe study used 2010–2018 data from China's A-share listed companies and a difference-in-differences (DID) model to explore the effect of the reform on firm-level investment decisions.FindingsThe authors found that China's tax reform has improved investment efficiency in underinvested firms, increased liquidity and decreased the level of reliance on external financing. The tax reform had a greater effect on investment efficiency in firms with lower liquidity and higher external financing reliance. Its effect was also more significant among non-state-owned and small companies.Originality/valueThis study fills the aforementioned research gap by exploring the effects of China's tax reform, thus providing a theoretical reference and a basis for policymaking.

This study examines the impact of credit ratings on the efficiency of firms' investments. Using a large sample of US firms, we find a positive relationship between the existence of credit ratings and investment efficiency. The cross‐sectional analyses show the positive relationship is more pronounced for firms with greater information asymmetry and weaker corporate governance. Our results are robust to different methods to address potential endogeneity concerns, alternative measures of key variables, and the inclusion of additional control variables. Overall, the findings support the notion that credit rating agencies enhance information transparency and external monitoring, thereby allowing rated firms to promote investment efficiency. The findings contribute to our understanding of the significant role played by credit rating agencies in shaping firms' investment behaviour and efficiency.

Improving the investment efficiency of renewable energy (RE) firms is one of the critical measures for energy low‐carbon transformation and mitigating climate change. To investigate the impact of climate change (greenhouse gas emissions, extreme temperatures, and extreme weather events) on the investment efficiency of RE firms, the present study applied a fixed effect regression model by using the panel data of China's 205 listed non‐hydro RE firms during 2008–2019. The influencing mechanism and the heterogeneity among RE firms are also explored. The results show that (1) CO2 emissions and extreme weather events significantly improve the investment efficiency of RE firms, whereas extreme temperatures' effect is significantly negative. (2) CO2 emissions can promote the investment efficiency of wind and solar firms with environmental responsibility through reducing agency problems and information asymmetry. (3) RE policies play an active role between climate change and investment efficiency of wind and solar energy firms, but the promotion effect is not significant for biomass energy firms. (4) The joint effect of climate change and RE policies on investment efficiency are more prominent for wind and solar energy firms in a low‐marketized environment and state‐owned firms. These results suggest that wind and solar firms should seize market investment opportunities when facing climate change. Besides, policymakers should strengthen market‐oriented construction and improve the completeness of RE policies in low‐marketization areas.

This paper argues that the structure of corporate ownership varies systematically in ways that are consistent with value maximization. Among the variables that are empirically significant in explaining the variation in ownership structure for 511 U.S. corporations are firm size, instability of profit rate, whether or not the firm is a regulated utility or financial institution, and whether or not the firm is in the mass media or sports industry. Doubt is cast on the Berle-Means thesis, as no significant relationship is found between ownership concentration and accounting profit rates for this set of firms.

<p class="s0">This study examines the investment efficiency of private and public firms in Korea. Prior studies suggest that the investment efficiency of firms can change according to the companies' agency problem caused by the existence of information asymmetry. Moreover, they argue that there is less information asymmetry in private firms than in public firms, because the major investors of private firms have access to the internal information of the companies. We extend these studies by comparing the investment efficiency of private and public firms using an extended audited financial dataset of Korean firms. Our results show that the investment efficiency of private firms is higher than that of public firms, because the agency problem of the former is lower than that of the latter. Additionally, private firms invest more efficiently in R&D and capital expenditures than public firms. Further, when we use alternative exogenous firm-specific proxies to measure the likelihood of over or under-investment, the results are substantially consistent with the main results. Finally, we re-test our hypotheses by including financial reporting quality proxies as control variables in the main regression model. These investigations further support our main results. Our study contributes to emerging literature on the difference between private and public firms by showing that the investment efficiency of the former is different from that of the latter. In addition, this study provides additional evidence on the agency problem that affects firms' investment decisions.</p>

How does analysts' forecast quality relate to corporate investment efficiency?

PurposeThe purpose of the present study is to evaluate the efficiency of glass firms in India.Design/methodology/approachData envelopment analysis (DEA) has been employed to study the technical, scale and super efficiency measures of glass firms in India.FindingsMajor findings of DEA analysis show that 65 percent firms are found to be technically efficient. Returns to scale analysis indicate that five firms are operating at decreasing returns to scale and two firms are exhibiting increasing returns to scale. Further, results show that small– and medium–scale firms are more efficient than large–scale firms. Old firms are more efficient compared to the young firms and foreign-owned firms are technically more efficient compared to the domestic firms.Practical implicationsThe results of this study would help the managers to assess their relative efficiency and take corrective measures to efficiently use their resources.Originality/valueThis seems to be the first study to apply DEA to analyze the efficiency of glass firms in India. No previous study on glass industry seems to have decomposed the measure of overall technical efficiency into its components, namely pure technical efficiency and scale efficiency and no study seems to have examined whether ownership, age and size of a firm are significant for its efficiency. In addition, no earlier study seems to have ranked the glass firms based on their efficiency values. Further, target values of inputs and outputs are demonstrated in this study. Stability of efficiency scores is also checked.

Has the efficiency of firms in India improved since its liberalization in 1991? The authors attempt to answer this question by analyzing the determinants of firm‐level efficiency in six manufacturing sectors in India while focusing on the effects of liberalization and domestic competition. They find that there was an increase in overall efficiency in the post‐reform period in India in five out of the six sectors. While imports do not seem to improve efficiency, liberalization did increase efficiency in four of the sectors.

Poor cash flow leads to insolvency of the firm. One of the most important factors that lead to poor cash flow is the inefficiency of working capital management. This study investigates relationships between promoter ownership and working capital management efficiency of Indian manufacturing firms. A sample of 151 manufacturing firms was selected from Top 500 Companies listed on the Bombay Stock Exchange (BSE) for a period of five years (from 2010-2014). Results indicate that changes in promoter ownership play a role in changing working capital management efficiency of Indian manufacturing firms by reducing their cash conversion cycle and by improving cash conversion efficiency. This study contributes to the literature on the factors that cause changes in working capital management efficiency. The findings may be useful for financial managers, operations managers, investors, financial management consultants, and other stakeholders

We investigate whether accounting information system quality has an impact on the level and efficiency of firms’ investments. While firms’ growth depends on investment and financing decisions, accounting information is fundamental for the decision-making of several stakeholders. We assess the accounting information system quality by discretionary accruals, whereas the investment inefficiency is estimated by the residuals of an investment regression for a sample of 3073 Portuguese SMEs from 27 industries, over the period from 2016 to 2021 using a panel regression analysis. The empirical evidence suggests that firms exhibiting higher accounting information system quality tend to invest more. In addition, firms with a lower accounting information system quality have more inefficient investments, as they tend to engage in more overinvestment, although this is not significant for underinvestment. Therefore, this study provides new evidence regarding the impact of accounting information systems on investment that may be useful for several stakeholders, such as managers, creditors, regulators, and academics, by providing evidence for SMEs, where empirical studies are scarce.

Recent theoretical work suggests that short sellers can manipulate firms into making suboptimal investment decisions. In this study, I empirically test whether short sellers improve or harm the efficiency of firms' capital investment. Overall, I show that short selling improves the efficiency of firms' capital budgeting. However, I also demonstrate that following the full repeal of the uptick rule in 2007, short selling now has a deleterious effect on investment efficiency. Furthermore, in subsample analyses, I find support for manipulative short selling taking place in firms with high levels of short-term leverage, stock market liquidity, and informed trading..

Based on the research perspective of bank traceability, this paper examines the dynamic impact of the financial ecological diversity of the Belt and Road countries on the efficiency of Chinese firms’ overseas investment from a dynamic perspective. The conclusion shows that the distributions of Chinese commercial banks in the countries along the routes can promote the efficiency of Chinese firms’ overseas investment. The promoting effect increases with the increase of the number of distribution points, but the improvement degree of each distribution site on the efficiency level of firms’ overseas investment shows a weakening trend. Further research shows that the distributions of Chinese commercial banks have significant heterogeneous effect on the overseas investment efficiency of Chinese firms. Specifically, in terms of firm development stage, the overseas distributions of Chinese commercial banks have a more significant effect on the overseas investment efficiency of newly listed firms. In terms of firm financing constraints, the distributions of Chinese commercial banks have a more significant effect on the overseas investment efficiency of firms with high leverage ratio. In terms of firm investment strategy, the advance distributions of Chinese commercial banks in the countries along the route effectively alleviate the overseas under-investment of non-sequential firms.

Corporate Ownership and the Technical and Scale Efficiency of Pharmaceutical Firms in India - Empirical EvidenceIn the existing literature, the theoretical models suggest that foreign-owned firms perform better than domestic firms and that private sector firms perform better than public sector firms. The present study is a modest attempt in this regard to empirically test and compare the differences in the technical and scale efficiencies of 36 public limited companies, private sector firms and foreign firms belonging to the pharmaceutical industry of India using the DEA model. The analysis shows that overall technical efficiency was different in the case of private domestic and public sector firms in the year 1990, i.e., the pre-reform period. The difference was also significant in the case of private foreign and public sector firms, though it was not significant in the case of private domestic and private foreign firms in the pre-reform period. However, in the subsequent post-reform years, there were no significant differences.