This paper examines how one aspect of earnings quality - discretionary accruals - affects subsequent capital investment pattern and efficiency. We find that, conditional on investment opportunities, investment in fixed assets in period t is less sensitive to internal cash flows for firms with...

Price Earnings- and Market Book-ratios presume a systematic link between financial statement data and company value. We analyze this relationship in a steady state model with overlapping capacity investments where company value is inferred from a constant growth residual income model. We...