Financial reporting quality, family ownership, and investment efficiency: An empirical investigation
ISSN: 0307-4358
Article publication date: 19 March 2019
Issue publication date: 8 April 2019
Abstract
Purpose
The purpose of this paper is to empirically investigate the impact of two monitoring mechanisms: family ownership (FO) and financial reporting quality (FRQ) on investment efficiency (IE) over the period of 2007–2014 for listed firms on the Pakistan Stock Exchange.
Design/methodology/approach
The authors employ two-dimensional pooled OLS cluster at the firm and year level, two-stage least square regression and feasible generalized lease square regression regression methods.
Findings
The findings suggest that higher FRQ and FO are associated with higher IE. Further, the authors report that higher FRQ and FO mitigate over- and under-investment. The impact of FRQ on IE is stronger (weaker) for family-controlled businesses. The results for these particular estimates are robust for alternative estimation techniques and measures of FRQ and FO.
Originality/value
The study draws on both agency and behavioral agency theories and therefore contributes to the literature in the following ways. First, the authors examine a relationship between FRQ and IE. Second, the authors test the impact of FO on IE. Third, the authors test the moderating impact of FO on the relationship between FRQ and the IE of family and non-family firms in relatively less regulated emerging market.
Keywords
Citation
Shahzad, F., Rehman, I.U., Colombage, S. and Nawaz, F. (2019), "Financial reporting quality, family ownership, and investment efficiency: An empirical investigation", Managerial Finance, Vol. 45 No. 4, pp. 513-535. https://doi.org/10.1108/MF-02-2018-0081
Publisher
:Emerald Publishing Limited
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