Accounting Information Quality, Free Cash Flow, and Over-Investment: Evidence from an Emerging Market – a Study in Iran

Journal article

Afsharmehr, M., Nasseri, A., Yazdifar, H. and Albahloul, M. 2024. Accounting Information Quality, Free Cash Flow, and Over-Investment: Evidence from an Emerging Market – a Study in Iran. Journal for International Business and Entrepreneurship Development (JIBED). 15 (4), pp. 511 - 532. https://doi.org/https://dx.doi.org/10.1504/JIBED.2023.138123
AuthorsAfsharmehr, M., Nasseri, A., Yazdifar, H. and Albahloul, M.
Abstract

This paper investigates the relationship between accounting information quality (AIQ) and over-investment based on data from 110 companies in the Tehran Stock Exchange from 2008 to 2014 and also compares the relationship between AIQ and over-investment in companies with low and high free cash flow. Principal-Agent Theory and Information economic theory suggest that an increase in accounting information quality can decrease over-investment. AIQ by Dechow and Dichev’s Model (2002), over-investment by Richardson’s Model (2006), and free cash flow by Yuan and Jiang’s Method (2008) were measured and hypotheses were tested using Yuan and Jiang’s Model (2008). Results of this investigation show that there is a reverse and meaningful relationship between AIQ and over-investment; which means that improvement of AIQ can decrease over-investment. Also, the effects of AIQ on over-investment in companies with high free cash flow is greater than in companies with low free cash flow.

KeywordsAccounting information quality; over investment; free cash flow; principal-agent theory; information economic theory
Year2024
JournalJournal for International Business and Entrepreneurship Development (JIBED)
Journal citation15 (4), pp. 511 - 532
PublisherInderscience Publishers
ISSN 1747-6763
Digital Object Identifier (DOI)https://doi.org/https://dx.doi.org/10.1504/JIBED.2023.138123
Web address (URL)https://www.inderscience.com/info/inarticle.php?artid=138123
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Open
Output statusPublished
Publication dates
Online29 Apr 2024
Publication process dates
Accepted13 Nov 2023
Deposited07 May 2024
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