Increased disclosure and investment efficiency

Shu Miao Lai, Chih Liang Liu*, Taychang Wang

*Corresponding author for this work

Research output: Contribution to journalArticle

13 Scopus citations

Abstract

This paper investigates the relation between increased disclosure level and capital investment efficiency. We hypothesize that increased disclosure level can reduce information asymmetry, which in turn improves capital investment efficiency. Consistent with our hypothesis, we document a significantly negative association between disclosure level and measures of inefficient investments, such as level of investment inefficiency, overinvestment, and underinvestment, indicating that firms increased disclosure level are found to improve investment efficiency. These results are robustness after using various measures for level of investment inefficiency and increased disclosure and considering different types of disclosure such as voluntary disclosure. Overall, our findings suggest that through reducing information asymmetry, increased disclosure level induces managers to act in the best interest of shareholders, which improves capital investment efficiency.

Original languageEnglish
Pages (from-to)308-327
Number of pages20
JournalAsia-Pacific Journal of Accounting and Economics
Volume21
Issue number3
DOIs
StatePublished - Jul 2014

Keywords

  • capital investment
  • disclosure
  • investment efficiency
  • transparency

Fingerprint Dive into the research topics of 'Increased disclosure and investment efficiency'. Together they form a unique fingerprint.

  • Cite this