The Effect of Accounting Information Quality and Disclosure Quality on the Use of Financial Resources in Firms’ Core Business

The fast growth of economic relations has led to strong competition in trade. To survive and expand their activities, firms need to suitable and timely investments. Creating a transparent and credible information environment by market players will undermine firms to utilize financial resources in their core business, which leads to an optimal allocation of market resources. This research investigates the effect of accounting information quality and disclosure quality on the use of financial resources in core business of 137 firms listed in Tehran Stock Exchange during 2003-2016. To test the research hypotheses, this research uses the multivariate regression model with control of years’ and industries’ effects and also uses the panel data approach. The results show that the increase in accounting information quality and disclosure quality increases the use of financial resources in firms’ core business. Also, the findings show that, compared to disclosure quality, the accounting information quality has a stronger effect on the use of financial resources in firms’ core business.