# Firms’ Investment Level and (In)Efficiency: The Role of Accounting Information System Quality

^{1}

^{2}

^{*}

## Abstract

**:**

## 1. Introduction

## 2. Literature Review

#### 2.1. Accounting Information System Quality

#### 2.2. Investment Efficiency

#### 2.3. Role of Accounting Information System on Investment Efficiency

**H1:**

**H2:**

**H3:**

## 3. Results

#### 3.1. Descriptive Statistics

#### 3.2. Econometric Results and Discussion

^{2}indicates that the independent variables globally explain 2.04% of the variation in the INV of Portuguese SMEs.

^{2}is 0.9%, in Model 1, meaning that the variables together explain 0.9% of the variation in overinvestment for the sample of the firms. Other studies that aim to explain the overinvestment also have a low R

^{2}(around 5%), such as Linhares et al. (2018) and Cardoso (2019) with an R

^{2}of 5%. The R

^{2}is 0.76%, in Model 2, maintaining the same logic explained for Model 1.

^{2}is 0.6% for Model 1 and 0.4% for Model 2, meaning that the variables together explain less than 1% of the variation in underinvestment. Studies that aim to explain underinvestment also have a low (4% to 5%) R

^{2}, such as Cardoso (2019) and Linhares et al. (2018).

## 4. Materials and Methods

#### 4.1. Sample Selection

#### 4.2. Empirical Model

- i, t corresponds to firm i and year t;
- TCA is the total accruals scaled by the lagged total assets;
- SIZE is the total assets of firm I;
- ΔSales is the change in sales from the previous to the current year, scaled by the lagged total assets;
- ΔAR is the change in accounts receivable from the previous to the current year, scaled by the lagged total assets;
- PPE is the net property, plant, and equipment scaled by the lagged total assets;
- ROA represents a return on assets in the previous period, computed by EBIT scaled by the total assets.

- i, t corresponds to firm i and year t;
- AC is the current assets;
- LC is the current liabilities;
- Cash represents both cash and bank deposits;
- STD corresponds to the short-term debt;
- DDA represents the depreciation and amortization costs.

- i, t corresponds to firm i and year t;
- INV represents the change in value of the investment from the previous to the current year over total assets in the previous year, with the investment value being calculated through the sum of changes in tangible fixed assets and intangible assets;
- DAC corresponds to the estimated discretionary accruals, obtained by estimating the error term of Equation (1).

- Inv is the total investment, calculated through the sum of tangible and intangible fixed assets;
- SalesGrowth is the percentage change in sales from the previous to the current year.

## 5. Conclusions

## Author Contributions

## Funding

## Informed Consent Statement

## Data Availability Statement

## Conflicts of Interest

## Note

1 | https://login.bvdinfo.com/R0/SabiNeo (accessed on 15 May 2023). |

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Variables | Observations | Mean | Median | Std. Deviation | Maximum | Minimum |
---|---|---|---|---|---|---|

INV | 18.438 | 0.0154 | −0.0015 | 0.0735 | 0.4008 | −0.1187 |

DAC | 18.438 | 0.000 | −0.0037 | 0.1137 | 0.3878 | −0.3467 |

Size | 18.438 | 8,986,813 | 6,366,345 | 7,163,233 | 34,699,529 | 2,214,733 |

Growth | 18.438 | 0.0635 | 0.0439 | 0.2576 | 1.1365 | −0.6362 |

Debt | 18.438 | 0.2358 | 0.2117 | 0.1958 | 0.7756 | 0.0000 |

ROA | 18.438 | 0.0374 | 0.0262 | 0.0654 | 0.2731 | −0.1656 |

Panel A: Firms That Overinvest | ||||||
---|---|---|---|---|---|---|

Variables | Observations | Average | Median | Std. Deviation | Maximum | Minimum |

Audit | 4610 | 0.0737 | 0.000 | 0.26139 | 1.00000 | 0.0000 |

DAC | 4610 | 0.0016 | 0.0017 | 0.10979 | 0.3650 | −0.3722 |

Loss | 4610 | 0.1883 | 0.000 | 0.39098 | 1.0000 | 0.000 |

OverInv | 4610 | 0.2778 | 0.2432 | 0.1334 | 0.7911 | 0.1280 |

Panel B: Firms That Underinvest | ||||||

Audit | 4610 | 0.1176 | 0.0000 | 0.3221 | 1.0000 | 0.0000 |

DAC | 4610 | 0.0018 | −0.0024 | 0.1246 | 0.4179 | −0.4293 |

Loss | 4610 | 0.1299 | 0.0000 | 0.3362 | 1.0000 | 0.0000 |

UnderInv | 4610 | −0.2348 | −0.2068 | 0.0875 | −0.1456 | −0.5713 |

Panel C: Firms with Efficient Investment | ||||||

Audit | 9218 | 0.0716 | 0.0000 | 0.2578 | 1.0000 | 0.0000 |

DAC | 9218 | −0.0022 | −0.0078 | 0.1114 | 0.3823 | −0.32475 |

Loss | 9218 | 0.1316 | 0.0000 | 0.3380 | 1.0000 | 0.0000 |

EfficientInv | 9218 | −0.0229 | −0.02884 | 0.1114 | 0.12213 | −0.14230 |

Size | Growth | Debt | DAC | ROA | INV | |
---|---|---|---|---|---|---|

Size | 1.000 | |||||

Growth | 0.034 *** | 1.000 | ||||

Debt | 0.057 *** | 0.038 *** | 1.000 | |||

DAC | 0.035 *** | 0.066 *** | 0.041 *** | 1.000 | ||

ROA | 0.026 *** | 0.237 *** | −0.286 *** | 0.091 *** | 1.000 | |

INV | 0.039 *** | 0.097 *** | 0.007 | −0.058 *** | 0.072 *** | 1.000 |

Panel A: Firms That Overinvest | ||||||||
---|---|---|---|---|---|---|---|---|

Model 1 | Model 2 | |||||||

Audit | DAC | Loss | OverInv | Audit | DAC | Loss | OverInv | |

Audit | 1.000 | 1.000 | ||||||

DAC | −0.013 | 1.000 | −0.033 ** | 1.000 | ||||

Loss | 0.117 ** | −0.042 ** | 1.000 | 0.114 ** | −0.075 ** | 1.000 | ||

OverInv | 0.089 ** | 0.004 | 0.047 ** | 1.000 | 0.048 ** | 0.023 * | 0.072 ** | 1.000 |

Panel B: Firms That Underinvest | ||||||||

Audit | 1.000 | 1.000 | ||||||

DAC | −0.035 * | 1.000 | −0.022 * | 1.000 | ||||

Loss | 0.069 ** | −0.083 ** | 1.000 | 0.073 ** | −0.093 ** | 1.000 | ||

UnderInv | 0.012 | −0.026 | −0.069 ** | 1.000 | −0.049 ** | −0.028 ** | −0.034 ** | 1.000 |

Panel C: Firms with Efficient Investment | ||||||||

Audit | 1.0000 | |||||||

DAC | −0.032 | 1.000 | ||||||

Loss | 0.092 | −0.109 | 1.000 | |||||

EfficientInv | −0.019 | −0.011 | 0.041 ** | 1.000 |

Variables | Expected Sign | Coefficients |
---|---|---|

Intercept | −0.081 *** (−6.230) | |

DAC | − | −0.047 *** (−7.039) |

Size | + | 0.0057 *** (6.861) |

Growth | + | 0.0239 *** (9.712) |

Debt | −/+ | 0.0080 * (2.205) |

ROA | + | 0.0707 *** (6.665) |

No. observations | 18.438 | |

R^{2} | 0.0204 | |

R^{2} adjusted | 0.0201 | |

F Test | 51.8487 (***) | |

$\begin{array}{c}{\mathrm{INV}}_{\mathrm{i},\mathrm{t}}={\mathsf{\beta}}_{0}+{\mathsf{\beta}}_{1}{\mathrm{DAC}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta}}_{2}{\mathrm{Size}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta}}_{3}{\mathrm{Growth}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta}}_{4}{\mathrm{Debt}}_{\mathrm{i},\mathrm{t}}\\ +{\mathsf{\beta}}_{5}{\mathrm{ROA}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\mu}}_{\mathrm{i},\mathrm{t}}\end{array}$ |

Panel A: Firms That Overinvest | |||
---|---|---|---|

Model 1 | Model 2 | ||

Expected sign | Coefficient | Coefficient | |

Intercept | 0.2722 *** | 0.1534 *** | |

Audit | + | 0.0432 ** | 0.0240 |

Loss | − | 0.0126 | 0.0282 *** |

DAC | + | 0.0083 | 0.0421 * |

Observations | 4.610 | 9.219 | |

R^{2} | 0.0092 | 0.0076 | |

R^{2} adjusted | 0.0086 | 0.0073 | |

F-statistic | 3.6168 * | 8.4151 ** | |

$OverIn{v}_{i,t}$$={\beta}_{0}+{\beta}_{1}DA{C}_{i,t}+{\beta}_{2}Los{s}_{i,t}+{\beta}_{3}Audi{t}_{i,t}+{\mu}_{i,t}$ | |||

Panel B: Firms That Underinvest | |||

Model 1 | Model 2 | ||

Intercept | −0.2328 *** | −0.1589 *** | |

Audit | − | 0.0043 | −0.0153 * |

Loss | + | −0.0189 ** | −0.0099 * |

DAC | + | −0.0220 * | −0.0262 ** |

Observations | 4.610 | 9.219 | |

R^{2} | 0.0060 | 0.0043 | |

R^{2} adjusted | 0.0053 | 0.0040 | |

F-statistic | 3.7148 * | 6.74264 ** | |

$UnderIn{v}_{i,t}$$={\beta}_{0}+{\beta}_{1}DA{C}_{i,t}+{\beta}_{2}Los{s}_{i,t}+{\beta}_{3}Audi{t}_{i,t}+{\mu}_{i,t}$ |

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## Share and Cite

**MDPI and ACS Style**

Pereira, C.; Castro, B.; Gomes, L.; Canha, H.
Firms’ Investment Level and (In)Efficiency: The Role of Accounting Information System Quality. *Int. J. Financial Stud.* **2024**, *12*, 9.
https://doi.org/10.3390/ijfs12010009

**AMA Style**

Pereira C, Castro B, Gomes L, Canha H.
Firms’ Investment Level and (In)Efficiency: The Role of Accounting Information System Quality. *International Journal of Financial Studies*. 2024; 12(1):9.
https://doi.org/10.3390/ijfs12010009

**Chicago/Turabian Style**

Pereira, Cláudia, Beatriz Castro, Luís Gomes, and Helena Canha.
2024. "Firms’ Investment Level and (In)Efficiency: The Role of Accounting Information System Quality" *International Journal of Financial Studies* 12, no. 1: 9.
https://doi.org/10.3390/ijfs12010009