The Effect of Tax Purposes on Relationship between Financial Reporting Quality and Investment Efficiency in Companies Listed in Tehran Stock Exchange (TSE)

The goal of this study is to test the impact of tax purposes on relationship between financial reporting quality and investment efficiency. In this study، we consider discretionary accruals، discretionary revenues، accruals quality and average of these proxies to measure financial reporting quality. Negative deviation from the expected investment is considered as proxies for investment efficiency. The statistical population of the study is 134 companies listed in Tehran stock Exchange (TSE) for the period of years between 2003 and 2009. The results show that there is a positive relationship between the financial reporting quality and investment efficiency. Also financial reporting quality for firms with strong incentives to manage their earning for tax purpose has a negative relationship with investment efficiency. Thus in this situation، the financial reporting quality does not increase investment efficiency.