Financial Reporting Practices and Investment Decisions: A Review of the Literature (original) (raw)
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The purpose of this paper is to present an analysis and critique of Roychowdhury, Shroff, and Verdi’s The effects of financial reporting and disclosure on corporate investment: A review (Journal of Accounting & Economics, 68 (2019)). Roychowdhury, Shroff, and Verdi survey the empirical literature over the previous two decades on “whether and to what extent financial reporting facilitates the allocation of capital to the right investment projects,” “provide a framework to organize this literature,” and “highlight opportunities for future research.” The framework they provide for organizing the literature “articulate[s] two broad scenarios in which financial reporting ‘matters’ for investment choices: (i) the presence of information asymmetry that gives rise to agency frictions such as adverse selection and moral hazard costs, and (ii) the presence of uncertainty about growth opportunities.” The analysis and critique presented herein addresses the framework and the first scenario. In particular, it focuses on what they refer to as agency frictions and the opportunities they suggest for future research. While the question of whether and to what extent financial reporting facilitates the allocation of capital to the right investment projects is important and worthy of future research, the framework and first scenario present several problems that cannot easily be ignored if the opportunities for future research are to be pursued.
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Investment in context of Financial Reporting Quality: A SystematicReview
WAFFEN-UND KOSTUMKUNDE JOURNAL, 2020
Various literature review were carry out in order to assess the relation between Financial Reporting Quality and Investment. Nevertheless the relation between them requires more investigation from different perspective in order to extend our knowledge theoretically on what's been done and where the researches reached. this study present a systematic review on the relation between financial reporting quality and investment aiming to provide a comprehensive review of all articles addressed this topic till 2019. the main finding resulted of 28 articles and a model was built from the relation of different types of variables followed from the studies in order to extend our models. the main problem was with the frequency resulted from analyzing targeted relation. Moreover. Most of the studies was collected based on secondary data from the stock market and analyzed mainly by using the regression models, in additional to few surveys and qusi-experiments questionnaire and one interview. further , most of the articles were undertaken in Indonesia and Iran , followed by China then USA respectively among different countries. alongside by most of the studies which was analyzed were conducted in the context of corporation which is publicity listed in the stock market. Followed by private firms .our finding of this systematic review will enlighten the research targeting the relation between financial reporting quality and investment and would be helpful to spotlight future research guide and open opportunities for cross-disciplinary research .