Financial Reporting Quality and Investment Efficiency: Evidence from Indonesian Stock Market

Hanif Putra Ardianto (Universitas Airlangga, Surabaya, Indonesia)
Iman Harymawan (Universitas Airlangga, Surabaya, Indonesia)
Yuanita Intan Paramitasari (Universitas Airlangga, Surabaya, Indonesia)
Mohammad Nasih (Universitas Airlangga, Surabaya, Indonesia)

Economics and Finance in Indonesia
Volume 66, Number 2, December 2020

This study aims to analyze the impact of financial reporting quality on the investment efficiency of a company. The study uses 994 observations from companies listed on the Indonesia Stock Exchange (IDX) in three periods from 2013 to 2015. The findings suggest that higher financial reporting quality has a positive and significant relationship with investment efficiency. Furthermore, the tests were conducted on groups of companies experiencing underinvestment and overinvestment. It was found that higher financial reporting quality had a negative and significant relationship with companies experiencing overinvestment. The findings provide implications for investors in assessing investment management carried out by company.