Governance function of accounting information quality in capital investment choice

Document Type : Original Article

Authors
Alimohammad Alimohammadi 1
Afsaneh Tavangar 2
Mohammad Javad sharifi 3
1 Phd student- Islamic Azad university Central Tehran branch
2 Associate Professor, Islamic Azad university Central Tehran branch
3 MSc. Accounting- Emam Khomeini Gazvin University
Abstract
This paper examines the relationship between accounting information quality and capital investment choice from the perspective of accounting information’s governance function in Tehran STOCK Exchange during 2011-2016 .In this paper the capital investment choice is measured as the correlation of growth of operating sales between company and industry and implies that whether managers focus on core business in their capital decisions. The results show that the higher the quality of publicly listed firms’ accounting information, the stronger that correlation, particularly when the corporate governance of the listed company is poor. The findings imply that accounting information quality can thus optimize the capital investment choice, which complements and strengthens the functioning of corporate governance. The governance function of accounting information influences capital investment choice by decreasing information asymmetry and increasing information transparency. Hence, regulators should pay more attention to the market’s power to supervise the behavior of listed firms, improve the governance functions of accounting information and increase the eciency of capital allocation.
 
Keywords
Accounting Information Quality
Capital investment choice
Governance efficiency
governance functions of accounting information
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