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Financial reporting quality, debt maturity and investment efficiency

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  • Cutillas Gomariz, Mª Fuensanta
  • Sánchez Ballesta, Juan Pedro

Abstract

This study, conducted with a sample of Spanish listed companies during the period 1998–2008, examines the role of financial reporting quality and debt maturity in investment efficiency. The results show that financial reporting quality mitigates the overinvestment problem. Likewise, lower debt maturity can improve investment efficiency, reducing both overinvestment and underinvestment problems. We further find that financial reporting quality and debt maturity are mechanisms with some degree of substitution in enhancing investment efficiency: firms with lower (higher) use of short-term debt, exhibit higher (lower) financial reporting quality effect on investment efficiency.

Suggested Citation

  • Cutillas Gomariz, Mª Fuensanta & Sánchez Ballesta, Juan Pedro, 2014. "Financial reporting quality, debt maturity and investment efficiency," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 494-506.
    • Handle: RePEc:eee:jbfina:v:40:y:2014:i:c:p:494-506
    DOI: 10.1016/j.jbankfin.2013.07.013
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    More about this item

    Keywords

    Investment efficiency; Overinvestment; Underinvestment; Financial reporting quality; Debt maturity;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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