The Effect of Private Information and Monitoring on the Role of Accounting Quality in Investment Decisions
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Weber_Effect of private.pdf
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293.78 KB
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3593976ead93b76da067ac61a6157536
Author(s)
Beatty, Anne
Liao, W. Scott
Weber, Joseph P.
Date Issued
May 2010
Journal
Contemporary Accounting Research
Publisher
Wiley Blackwell
Citation
Beatty, Anne, W. Scott Liao, and Joseph Weber. “The Effect of Private Information and Monitoring on the Role of Accounting Quality in Investment Decisions*.” Contemporary Accounting Research 27.1 (2010): 17–47.
Version
Author's final manuscript
Abstract
Information asymmetry between managers and outside capital suppliers can affect how firms finance capital investments. A growing body of evidence indicates that better accounting quality can reduce information asymmetry costs and reduce financing constraints. Consistent with this possibility, Biddle and Hilary (2006) document that higher accounting quality reduces the sensitivity of firms’ investment to their internally generated cash flows. Verdi (2006) and Biddle, Hillary, and Verdi (2009) find that accounting quality is positively correlated with investment for firms prone to underinvest and is negatively correlated with investment for firms prone to overinvest.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike 3.0
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DOI of Published Version
https://doi.org/10.1111/j.1911-3846.2010.01000.x
