Accounting Quality and Firm-Level Capital Investment

42 Pages Posted: 23 Jun 2006

See all articles by Gary C. Biddle

Gary C. Biddle

University of Melbourne - Faculty of Business and Economics; Columbia Business School; HKU Business School; London Business School

Gilles Hilary

Georgetown University - Department of Accounting and Business Law

Abstract

This study examines how accounting quality relates to firm-level capital investment efficiency. Our first hypothesis is that higher quality accounting enhances investment efficiency by reducing information asymmetry between managers and outside suppliers of capital. Our second hypothesis is that this effect should be stronger in economies where financing is largely provided through arm's-length transactions compared with countries where creditors supply more capital. Our results are consistent with these hypotheses both across and within countries. They are robust to alternative econometric specifications, different measures of accounting quality and investment-cash flow sensitivity, and numerous control variables.

Keywords: investment, accounting quality

JEL Classification: D82, G31, M41, M43

Suggested Citation

Biddle, Gary C. and Hilary, Gilles, Accounting Quality and Firm-Level Capital Investment. Accounting Review, October 2006, Available at SSRN: https://ssrn.com/abstract=910806

Gary C. Biddle

University of Melbourne - Faculty of Business and Economics ( email )

Level 8, Dept of Accounting
198 Berkeley Street, Carlton
Melbourne, Victoria 3010 3010
Australia
61-3-8344-9807 (Phone)
61-3-9349-2397 (Fax)

HOME PAGE: http://https://findanexpert.unimelb.edu.au/profile/774767-gary-biddle

Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

HKU Business School ( email )

00000
Hong Kong

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Gilles Hilary (Contact Author)

Georgetown University - Department of Accounting and Business Law ( email )

McDonough School of Business
Washington, DC 20057
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
3,077
Abstract Views
10,817
rank
4,525
PlumX Metrics