Financial reporting quality and investment efficiency in manufacturing firms: The role of firm characteristics in an emerging market
Hanh Thi My Le, Cheng-Po Lai, Vu Hoai Phan, Vu Tien Pham
Keywords:
financial reporting quality (FRQ), investment efficiency (IE), manufacturing firm, moderating, emerging market, Vietnam
Abstract:
This study examines the relationship between financial reporting quality (FRQ) and investment efficiency (IE) in Vietnamese manufacturing firms and analyses the moderating role of various firm characteristics, including debt maturity (Stdebt), financial strength (Z), firm size and tax upon such relationship. The study uses a sample of manufacturing firms listed on the Vietnamese stock market from 2008 to 2021 to test and analyse overinvestment and underinvestment situations. Results indicate a positive relationship between FRQ and IE among manufacturing firms in Vietnam, and such a relationship is moderated by firm characteristics, including Stdebt, Z, firm size and tax. Moreover, debt maturity, TobinQ, audit and tax positively affect IE, whereas financial strength and firm size tend to affect IE negatively. Similarly, when firms are underinvested, TobinQ and leverage positively affect IE, whereas financial strength has a negative relationship with IE. Furthermore, the studying findings demonstrate that firm characteristics moderate the relationship between FRQ and IE. The results enhance the understanding of firm performance for CEOs and managers and provide short- and long-term internal strategies for sustainable development and goal achievement. Additionally, these findings assist investors in analysing and making informed investment decisions, helping firms minimise risks and enhance their competitiveness. Given the limited empirical research regarding the relationship between FRQ and IE in an emerging market, this study contributes to the existing literature by adding original value to this area. Furthermore, the findings confirm the agency and asymmetry information theories’ view.
Fulltext download:
 Financial reporting quality and investment efficiency in manufacturing firms: The role of firm characteristics in an emerging market [PDF file] [Filesize: 412.19 KB]
 10.7441/joc.2024.01.04
Le, H.T.M, Lai, Ch-P., Phan, V.H. & Pham, V.T. (2024). Financial reporting quality and investment efficiency in manufacturing firms: The role of firm characteristics in an emerging market. Journal of Competitiveness, 16(1), 62-78. https://doi.org/10.7441/joc.2024.01.04
|
