Designing a Model for Improving Investor Decision-Making and Investment Efficiency with Emphasis on Financial Reporting Quality: A Mixed-Methods Approach
Keywords:
Financial reporting, investor decision-making, information quality, financial disclosure, investment efficiencyAbstract
The main objective of this study is to design and present a comprehensive model for improving investor decision-making and enhancing investment efficiency with a focus on financial reporting quality. The research seeks to analyze the impact of financial reporting quality on investor behavior by examining the role of various factors including information disclosure, the informational environment, forward-looking perspectives, and socio-cultural dimensions. The present study was conducted using a mixed-methods approach (a combination of qualitative and quantitative analyses). In the qualitative section, semi-structured interviews were conducted with financial experts, and the data were analyzed through open, axial, and selective coding. In the quantitative section, the data were collected through questionnaires and evaluated using confirmatory factor analysis (CFA) and structural equation modeling (PLS-SEM). In addition, the ISM-DIMATEL method was applied to stratify and analyze the relationships among components. The study identified six core categories: (1) financial reporting quality, (2) investment efficiency, (3) investor behavior, (4) informational environment, (5) forward-looking perspective, and (6) socio-cultural impacts. The results indicated that financial reporting quality has a significant effect on reducing irrational behaviors, increasing market transparency, lowering the cost of capital, and improving decision-making. Furthermore, socio-cultural factors act as mediators by influencing investor trust and perceptions. The final model demonstrated a good fit (GOF > 0.4). Financial reporting quality is one of the key factors in improving investor behavior and enhancing investment efficiency. Policymakers, regulatory bodies, and corporate managers should focus on improving disclosure, standardizing reports, and considering cultural and forward-looking aspects in order to enhance information quality, strengthen market trust, and foster more rational financial behaviors.
Downloads
References
Al-Dmour, A. H., Abbod, M., & Al-Qadi, N. S. (2018). The Impact of the Quality of Financial Reporting on Non-financial Business Performance and the Role of Organizations Demographic' Attributes (Type, Size and Exprience). Academy of Accounting and Financial Studies Journal, 22(1), 1-18. https://doi.org/10.4018/IJCFA.2017070101
Ali Nejad, S., Rahnamay Roodposhti, F., & Rezaei, F. (2022). Testing the Informational Content Under the Influence of Investors' Emotional Behavior and Financial Reporting Quality. Scientific-Research Quarterly Journal of Investment Knowledge, 11(4), 103-125.
Barzideh, F., Bolou, G., & Nokhbeh Fallah, Z. (2023). Improvement Model for Disclosure in Financial Reporting. Empirical Accounting ResearchVL - 13(47), 1-26.
Cascino, S., & Gassen, J. (2015). What drives the comparability effect of mandatory IFRS adoption? Review of Accounting Studies, 20(1), 242-282. https://doi.org/10.1007/s11142-014-9296-5
Chen, L., Yue, M., & Dongwei, S. (2010). Corporate Governance and Firm Efficiency: Evidence from China Publicly Listed Firms.
Cornell, B., Landsman, W., & Stubben, S. (2017). Accounting information, investor sentiment and market pricing. Journal of Law, Finance, and Accounting, 345-325. https://doi.org/10.1561/108.00000017
Deloitte, L. (2016). Advancing Quality through Transparency.
Hlaciuc, E., Măciucă, G., Ursachi, A., & Mîniga, C. (2015). The Convergence of National Accounting with the International Financial Reporting Standards-Comparative Study Regarding the Accounting Reform in China and 'Romania. World, 5(3).
Houcinel, A., & Chakib Kolsi, M. (2017). The Effect of Financial Reporting Quality on Corporate Investment Efifciency: Evidence from the Tunisian Stock Market. Research in International Business and Finance(5), 34-31.
Houqe, M. N., Monem, R. M., & van Zijl, T. (2016). The economic consequences of IFRS adoption: Evidence from New Zealand. Journal of International Accounting, Auditing and Taxation, 27, 40-48. https://doi.org/10.1016/j.intaccaudtax.2016.10.001
Karimi, M., Eshaghzadeh, A., & Salehi Fard, M. (2022). Examining the Relationship Between Financial Reporting Quality and Companies' Investment Decisions with Emphasis on the Governance Role of Accounting Information. Scientific-Research Quarterly Journal of Investment Knowledge, 11(2), 27-55.
Li, Q., & Wang, T. (2010). Financial Reporting Quality and Corporate Investment Efficiency: Chinese Experience. Nankai Business Review International, 1(2), 197-213. https://doi.org/10.1108/20408741011052591
Piri, P., Didar, H., & Daneshyar, F. (2014). Examining the Relationship Between Financial Reporting Quality and Auditor Opinion Type in Companies Listed on the Tehran Stock Exchange. Applied Research in Financial Reporting, 3(5), 47-74.
Rahimi, A., & Kiani, A. (2024). The Impact of Accounting Comparability on Financial Reporting Quality and Tax Avoidance. Financial Accounting and Auditing Research, 16(1), 187-218.
Seyyed Jamali, Z. S., & Doaee, M. (2018). The Relationship Between Financial Reporting Quality and Investment Efficiency Considering the Moderating Effect of Information Asymmetry and Ownership Structure in Companies Listed on the Tehran Stock Exchange. New Research Approaches in Management and Accounting(6), 110-126.
Shahabi Rad, E., Faghani Makrani, K., & Zabihi, A. (2024). A Model for Identifying the Impact of Spiritual Intelligence on Emotional Intelligence and Behavioral Biases Based on Personal Judgment to Improve the Decision-Making Process of Investors. Financial Accounting and Auditing Research, 16(1), 269-300.
Taskin, D., Hunjra, A., & Ahmad, M. (2021). Do asymmetric information and leverage affect investment decisions? The Quarterly Review of Economics and Finance, 29(7), 8-17.
Vahdani, M., & Mohammadi Mehr, J. (2024). The Relationship Between Integrated Financial Reporting and Profit Forecast Bias and Stock Price Informativeness. Financial Accounting and Auditing Research, 16(1), 79EP - 103.
Zhang, X., Zhang, Q., Chen, D., & Gu, J. (2019). Financial integration, investor protection and imbalanced optimistically biased information timeliness in emerging markets. International Review of Financial Analysis, 64, 38-56. https://doi.org/10.1016/j.irfa.2019.04.006
Downloads
Published
Submitted
Revised
Accepted
Issue
Section
License
Copyright (c) 2024 Nazanin Shah Hosseini, Amir Yalfani, Arezo Khosravani (Author)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
