Evaluating theInvestment Efficiency on internal quality and Managerial Overconfidence

Subject Areas : Journal of Capital Market Analysis

Omid mehri namakavarani ¹ , hosein kazemi ² , mahdi beshkooh ³ , atena mehri namakavarani ⁴

1 - Department of Accounting, Qazvin Branch, Islamic Azad University, Qazvin, Iran
2 - Department of Accounting, Qazvin Branch, Islamic Azad University, Qazvin, Iran
3 - Department of Accounting, Qazvin Branch, Islamic Azad University, Qazvin, Iran
4 - Master Graduated of Accounting, Department of Accounting, Qazvin Branch, Islamic Azad University, Qazvin, Iran

Received: 2022-09-24 Accepted : 2022-12-16 Published : 2023-02-20

Keywords: Managerial overconfidence, Internal Information Quality, More investment, underinvestment,

Abstract :

The present research is aimed at investigating the relationship among managerial overconfidence, internal information quality, and investment efficiency in companies listed on the Tehran Stock Exchange (TSE). To this end, the financial information of 84 companies listed on the Tehran Stock Exchange (TSE) during the years 2014-2021 was employed. The research results indicate a positive significant relationship among the internal information quality, investment efficiency, and overinvestment; however, the relationship between the quality of internal information and underinvestment is negative and significant. Further, the results revealed that managerial overconfidence improves the relationship between the internal information quality and investment efficiency, while it weakens the relationship among the earning announcement rate, the accuracy of profit forecast by management, and overinvestment. Nevertheless, the opposite applies concerning the absence of updated financial statements due to significant errors. Moreover, the relationship among the earning announcement rate, the accuracy of profit forecast by management, and underinvestment is not affected by managerial overconfidence; but managerial overconfidence strengthens the relationship between the absence of updated financial statements due to significant mistakes and underinvestment.