Internal Information Quality and the Sensitivity of Investment to Market Prices and Accounting Profits

• 成果类型: Article
• 署名作者: Heitzman, Shane; Huang, Mengjie
• 署名单位: University of Southern California; Fordham University
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12468
• 发表日期: 2019
• 页码: 1699-1723
• 关键词: financial-reporting quality; cash flow sensitivities; corporate-investment; private information; measurement error; Accruals quality; stock-market; environment; RISK; ECONOMICS

摘要

We ask whether the quality of internal information matters for investment decisions. We predict that investment is more sensitive to internal profit signals and less sensitive to external price signals when managers have higher-quality internal information. Consistent with recent theoretical and empirical research, we proxy for internal information quality using observable information properties. We find that the sensitivity of investment to profitability is increasing, while the sensitivity of investment to market-to-book is decreasing in internal information quality. Our focus on internal information and decision making offers new and unique insights on the importance of information quality and complements the growing literature on the role of external reporting quality in reducing financing frictions.