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dc.creatorNan L.
dc.creatorWen X.
dc.date.accessioned2023-10-20T16:07:08Z
dc.date.available2023-10-20T16:07:08Z
dc.date.issued2023
dc.identifier.urihttps://doi.org/10.1111/1911-3846.12845
dc.identifier.urihttps://repository.tcu.edu/handle/116099117/61274
dc.description.abstractWe examine information quality and financial leverage when an entrepreneur needs financing to undertake a risky project and his effort input affects the project's outcome. We show that information quality and financial leverage interact to play active roles in both investment and effort decisions. Our analysis shows a positive association between leverage and optimal information quality¿when leverage is low (high), low (high) information quality is optimal. This is because with low leverage, the entrepreneur is already motivated by his large share of the outcome to exert effort, and high information quality is not efficient as a precise bad signal discourages the entrepreneur's effort. In contrast, when leverage is high and thus the entrepreneur is less motivated by his residual cash flows, high information quality is optimal, because a precise good signal encourages the entrepreneur's effort. Our study highlights the joint effect of information quality and financial leverage on overall efficiency through firms' effort inputs as well as on defining investment efficiency. ¿ 2022 The Authors. Contemporary Accounting Research published by Wiley Periodicals LLC on behalf of the Canadian Academic Accounting Association.
dc.languageen
dc.publisherJohn Wiley and Sons Inc
dc.sourceContemporary Accounting Research
dc.subjectefficiency
dc.subjecteffort decision
dc.subjectfinancial leverage
dc.subjectinformation quality
dc.titleFinancial Leverage, Information Quality, and Efficiency*
dc.typeArticle
dc.rights.licenseCC BY 4.0
local.collegeNeeley School of Business
local.departmentAccounting
local.personsWen (ACCT)


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