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Financing and Investment Efficiency, Information Quality, and Accounting Biases

Authors:

Xiaoyan WenAuthors Info & Claims

Management Science, Volume 60, Issue 9

Pages 2308 - 2323

https://doi.org/10.1287/mnsc.2013.1864

Published: 01 September 2014 Publication History

Abstract

In this paper, we investigate the effect of accounting biases on firms' financing decisions and the role of accounting biases in endogenous information quality. We show that in industries with generally low-profit prospects, a downward-biased accounting system performs better than a neutral accounting system, and a more downward bias helps mitigate both investment and financing inefficiency; whereas for industries with generally high-profit prospects, an upward-biased accounting system is better than a neutral accounting system, and a more upward bias helps improve financing efficiency. In addition, we find that a more downward-biased accounting system motivates good firms to exert more effort to improve the information quality, which improves overall efficiency.

This paper was accepted by Mary Barth, accounting.

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Cited By

Kronenberger SLaux V(2022)Conservative Accounting, Audit Quality, and LitigationManagement Science10.1287/mnsc.2021.397168:3(2349-2362)Online publication date: 1-Mar-2022
https://dl.acm.org/doi/10.1287/mnsc.2021.3971
Chen QHuang ZJiang XZhang GZhang Y(2021)Asymmetric Reporting Timeliness and Informational FeedbackManagement Science10.1287/mnsc.2020.373467:8(5194-5208)Online publication date: 1-Aug-2021
https://dl.acm.org/doi/10.1287/mnsc.2020.3734
Nan LWen X(2019)Penalties, Manipulation, and Investment EfficiencyManagement Science10.1287/mnsc.2018.314965:10(4878-4900)Online publication date: 1-Oct-2019
https://dl.acm.org/doi/10.1287/mnsc.2018.3149
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Financing and Investment Efficiency, Information Quality, and Accounting Biases
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Published In

cover image Management Science

Management Science Volume 60, Issue 9

September 2014

273 pages

ISSN:0025-1909

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Publisher

INFORMS

Linthicum, MD, United States

Publication History

Published: 01 September 2014

Accepted: 21 October 2013

Received: 19 January 2012

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Cited By

Kronenberger SLaux V(2022)Conservative Accounting, Audit Quality, and LitigationManagement Science10.1287/mnsc.2021.397168:3(2349-2362)Online publication date: 1-Mar-2022
https://dl.acm.org/doi/10.1287/mnsc.2021.3971
Chen QHuang ZJiang XZhang GZhang Y(2021)Asymmetric Reporting Timeliness and Informational FeedbackManagement Science10.1287/mnsc.2020.373467:8(5194-5208)Online publication date: 1-Aug-2021
https://dl.acm.org/doi/10.1287/mnsc.2020.3734
Nan LWen X(2019)Penalties, Manipulation, and Investment EfficiencyManagement Science10.1287/mnsc.2018.314965:10(4878-4900)Online publication date: 1-Oct-2019
https://dl.acm.org/doi/10.1287/mnsc.2018.3149
Caskey JLaux V(2019)Corporate Governance, Accounting Conservatism, and ManipulationManagement Science10.1287/mnsc.2015.234163:2(424-437)Online publication date: 5-Jan-2019
https://dl.acm.org/doi/10.1287/mnsc.2015.2341

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