Abstract
The conflicts of interest between managers and shareholders force managers to make decisions that do not meet the interests of shareholders. One of these decisions is to invest less in the company’s operational activities. Increasing the information quality is one way to prevent that issue, allowing stakeholders to monitor investment decisions. The present study investigates the relation of accounting information quality, corporate investment, and ownership structure for Iranian firms, using panel data analysis from 2009 to 2018. We applied a multiple regression model to test the hypotheses. The results show that the quality of accounting information significantly affects the investment decision for the company’s main operations, so the first hypothesis of the research is confirmed. At the same time, there is no effect of capital structure on accounting information quality and firms’ investment decisions. Thus, the second hypothesis of the research failed to be confirmed.
Highlights
Another study examined the effect of accounting information quality (AIQ) on under- and overinvestment of listed companies in Shanghai and Shenzhen Stock Exchanges from 2004 to 2006 [3]. e results showed that high-quality information could decrease the moral hazard and adverse selection and that strengthening contracts and oversight procedures avoids a lack of financial resources and overinvestments, improving the efficiency of capital allocation at the company level
The mean value of profit growth correlation as a measure of operational investment (OPIN) equals 0.452 with a standard deviation of 0.226 and varies between -0.219 and one. e mean of AIQ as a measure of earnings and information quality is 19.321 with a standard deviation of 8.131, which is in the range of 3.288 and 35.262. e mean value equals 90.116 percent for ownership concentration with a standard deviation of 9.028, ranging between 22.121 percent and 100 percent
Conclusions and Recommendations e present study aimed to investigate the relationship between accounting information quality (AIQ) and companies’ decisions to invest in their core operations and the role of ownership structure on the relationship between the variables. e quality of accruals, earnings stability, earnings predictability, and earnings smoothing has been used to measure AIQ
Summary
Many researchers have emphasized the important role of AIQ and the transparency of information in the capital markets. Institutional investors may make managerial changes through their voting rights on boards of directors and their actions In this regard, high AIQ helps external stakeholders involved in management understand the capital investment and the effectiveness of the company’s activities, affecting corporate investment choices. High AIQ helps external stakeholders involved in management understand the capital investment and the effectiveness of the company’s activities, affecting corporate investment choices For this reason, the first hypothesis of the present study is developed as follows. Many large companies in recent decades have been established by institutions and individuals affiliated to the government and political system, owning a significant portion of the ownership to control the businesses In these conditions, the development and growth of the capital market and its transparency and efficiency are related to the quality of performance and activities of these types of companies. We used multiple regression models with panel data set and related tests through Eviews 9 software to test the hypotheses
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