Accounting Comparability And Inefficient Investment

The "Thirteenth Five-Year Plan" clearly proposes to improve the investment efficiency of the capital market in order that investment can play an important role in stabilizing economic growth and adjusting economic structure.As the main force of economic development,enterprises should pay more attention to investment activities.As one of the three major financial activities of an enterprise,investment activities are critical to the current development of the company and the efficiency of investment will directly affect the sustainable development of the enterprise.In a nearly perfect market environment,profitability leads capital to flow from a project with a negative net present value to a project with a positive net present value.However,due to information asymmetry and agency problems,the investment efficiency of enterprises will be reduced,resulting in inefficient investment.The inefficient investment behavior of enterprises has a serious negative impact on the interests of shareholders at the micro level or the economic situation at the macro level.Therefore,inefficient investment has always been the focus of attention in the theoretical and practical circles.Scholars at home and abroad have analyzed the causes of inefficient investment from different aspects and accordingly proposed countermeasures to curb inefficient investment.The most discussed is the mechanism of the various quality characteristics of accounting information on inefficient investment,such as the impact of accounting information transparency,reliability,timeliness,and robustness on inefficient investments.However,due to the lack of effective measurement methods for accounting information comparability,few literatures use empirical research methods to explore the relationship between accounting information comparability and inefficient investment.But the comparability of accounting information is one of the most important qualities of accounting information mentioned in the conceptual framework of financial accounting.In addition,in the context of the international convergence of accounting standards,improving the comparability of corporate accounting information has become the main goal of International Accounting Standards Board.In 2007,China implemented the new accounting standards in order to achieve the substantive convergence with international financial reporting standards and also put forward new requirements for the comparability of corporate accounting information.Therefore,it is of great significance to explore how accounting information comparability affects the information transmission of capital markets and thus affects the investment decisions of enterprises.At first,the paper uses information asymmetry theory and principal-agent theory to analyze the causes of inefficient investment and the mechanism of accounting information comparability to curb inefficient investment.The specific path of accounting information comparability to suppress inefficient investment behavior is summarized as follows: first of all,high level accounting information comparability can reduce the agency costs of shareholders and management,major shareholders and minority shareholders so it can suppress over-investment or under-investment of management.In addition,high level accounting information comparability provides favorable conditions for the implementation of management’s relative performance evaluation system,thereby restraining management’s inefficient investment motives.Secondly,high level accounting information comparability can alleviate financing constraints and thus curb under-investment.Finally,high level accounting information comparability can enhance the “ learning effect” of management,thereby guiding management to take correct investment behavior and reduce under-investment or over-investment.On the basis of the above,this article uses the China’s A-share listed companies between 2010 and 2017 as samples,empirically tests the relationship between accounting information comparability and the inefficient investment of enterprises.The study finds that comparability of accounting information can inhibit the inefficient investment behavior of enterprises.Furthermore,the paper discusses the adjustment effect of ownership concentration and external information environment on accounting information comparability and enterprise inefficient investment.The study shows that when the concentration of ownership is high,interest synergy effect is stronger than interest encroachment effect.It is less likely that major shareholders will encroach on the interests of small and medium shareholders.At the same time,the major shareholders will oversee management more strongly.Therefore,the decision value of the financial information of the same industry for the reference of small and medium shareholders is small so the suppression of accounting information comparability on corporate inefficient investment has been weakened to some extent.On the contrary,if the concentration of ownership is low,interest encroachment effect play a more important role.The decision value of the financial information of the same industry for the reference of small and medium shareholders is great so comparability plays a more significant role in suppressing inefficient investments.In addition,the better the external information environment,the greater the information capture function will be played,the more significant the learning effect will be and finally the suppression of accounting information comparability on inefficient investment will be enhanced.The contributions of this paper are as follows: Firstly,the paper proves that the comparability of accounting information between companies in the same industry has negative externalities to the inefficient investment of enterprises.The paper expands the research of Chen et al.(2013),who emphasize that the negative externalities of accounting information comparability to corporate inefficient investment exist only among multinational companies.Furthermore,previous research literature mainly explored how the quality of accounting information reflected by indicators such as transparency,reliability,timeliness,and robustness affects the inefficient investment of enterprises which concentrate on accounting information within the company,but this paper is to measure the quality of accounting information by comparing information between enterprises in the same industry.Therefore,this paper expands the research literature on the impact of accounting information quality on inefficient investment.