Earnings Quality and Investment Efficiency: An Analysis of Electricity Companies Listed in B3 / Qualidade dos Lucros e Eficiência do Investimento: Uma Análise das Empresas de Eletricidade Listadas em B3

Edgar Maria Ferreira da Costa; Thaynara Pietro Fernandes; Josimar Pires da Silva; Rafael Martins Noriller

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<line> Centro Unv*rsitário Santo Agostinho </line>

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<line> www*.fsanet.com.*r/revista </line>

<line> *SSN Impresso: 18*6-6356 ISS* Eletr*nico: 2317-2983 </line>

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<line> Ea*nings Quality and Investment Ef*i*iency: An A*al*sis of **ectricity Com**nies Listed *n B3 </line>

<line> Qualida*e dos *u*ros e Efic*ência do Inve**imen*o: Uma Anál*se d*s Empr*s*s de Ele*ricidade </line>

<line> Listadas e* B3 </line>

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<line> *dgar Maria Ferr***a da Costa </line>

<line> *raduação em Ciê*cias Cont*beis pela Un*versidade Feder*l d* Grande Dourado* </line>

<line> edgar96c*st*@hotmail.**m </line>

<line> Thayn*ra *ietro Ferna*d** </line>

<line> Graduaç*o em Ciências Con*á*eis pela U*iversidade *ederal da Grande D*ura*os </line>

<line> thaynara.p*etr*85@*mail.*om </line>

<line> Josima* Pi*e* da Silva </line>

<line> D*uto* em Ciências Co*tábeis pela Universidade de Br*sília </line>

<line> josimarc*b@*m*i*.co* </line>

<line> Rafa*l Ma**ins Noriller </line>

<line> Dou*o* em Ci*ncias Cont*beis pel* *n*versidade de Brasília </line>

<line> r*fael.m*o*iller@gma**.c*m </line>

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<line> En*ereço: Ed*ar Maria Fe**eira da C*sta </line>

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<line> Uni*ersidade *eder*l da Grand* Dourado*. R. João *osa </line>

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<line> Góes, 1**1 - Vila Pro*resso, Dourado* - MS, 7*8*5-070. </line>

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<line> Brasil. </line>

<line> Editor-C*e*e: Dr. Ton*y Kerle* *e Alen*ar </line>

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<line> Endereço: Thaynara *ietro **rnandes </line>

<line> Rodrigues </line>

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<line> Unive*sidade F*deral da Grande Dourados. *. João R*s* </line>

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<line> Góes, 1761 - *ila Progr*sso, *o*rad*s - MS, 79825-070. </line>

<line> *rtigo recebido em 22/0*/2021. Últi*a </line>

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<line> recebida em 08/03/20*1. Aprovado *m 0*/*3/2021. </line>

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<line> E*dereç*: Josim*r *ires *a Silva </line>

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<row> Universid*de F*deral da Grande *ourados. R. João Ro*a </row>

<row> **es, *761 - Vila P*ogresso, Dou*ado* - MS, 79825-070. </row>

<row> *rasil. </row>

<row> Ende*eço: Rafael Martins Noriller </row>

<row> *ni*er*idade Federal da Grande Dour*dos. R. J*ão R*sa </row>

<row> Góes, 1761 - Vila Progress*, Dourados - M*, 798*5-070. </row>

</column>

<row> Avaliado pelo sistema Tripl* Review: De** Review a) </row>

<row> pelo Editor-Chefe; e b) D*u**e B*ind Revi** </row>

<row> (ava*ia*ã* *ega por do*s aval*adores d* área). </row>

<row> Revisã*: G*amatic*l, Normativa e de Formataç*o </row>

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<line> *. M. *. Costa, T. P. Fer*andes, J. P. Silva, R. *. N**i*l** </line>

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<line> ABSTRACT </line>

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<line> T*e present </line>

<line> study an*ly*es th* relatio*ship betw*en earn*ngs </line>

<line> quality </line>

<line> and investment </line>

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<row> efficienc* *f </row>

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<row> electricity c*mpanies listed in Brazil, *o*sa, Balcã* [B] </row>

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</column>

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<line> electric sector is due to t*e large n*m*er of companies, the v*lume of *e*ources invested in </line>

<line> the se*tor, *nd strong r*gu*ation as a r*ducing fac*or of in*o*ma**ona* a*y**etry. Th* dat* </line>

<line> a**lyz*d co*e*s the *erio* from 2010 t* 2**7 throu*h a sta*ic pane*, *n* comprises * sample </line>

<line> of 57 companies in *he electricity sector. We used info*mation contained in the fin*ncial </line>

</par>

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<line> statements extracted from *he [B]3 </line>

<line> d*tabase </line>

<line> on its website *or disclo*ure *urpos*s. *ighe*- </line>

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<line> quality financial rep**tin* should inc*ease investm*nt efficiency. Moreover, reducing adve**e </line>

<line> selection and mo*al hazard increases *he qua*ity of financial r*porting information and allo*s </line>

<line> manag*rs t* identify better inves*ment op*ortunitie*. With this i* mind, *he hy*othes*s of this </line>

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<line> research is th*t there is a signifi*an* </line>

<line> and positive *elationship betwee* earnings qu*lity and </line>

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<line> inves*ment efficien*y of electricity co**anies listed *n [B]3. Results i*dicated a positive </line>

<line> re*a*ionsh*p *etween earnings qual*ty and inv*stment efficienc*, esp*c**lly mitigating </line>

<line> *verin*estment. T*ese res*lts corroborate studi*s c*n*uct*d in devel*ped economies. </line>

<line> No*wi*hsta*ding, higher *nf*rmat*on quali*y d*es not mitigate **derinve**ment. </line>

<line> Keywords: *n*estment Ef*ici*nc*. *nformation Qual*t*. Electricity Sector. </line>

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<line> O presente *studo analis* a relaçã* entre a qua*id*de d*s ganh*s e a </line>

<line> eficiênc*a </line>

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<line> in*estimento das empr*sas d* el*tri*idade lista*as no Br*sil, B*l*a, Balcão [B] 3. A *s*ol*a </line>

<line> *o set*r elétric* se deve ao *rande n*mero de em*resas, ao volume de recu*sos invest*dos no </line>

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<line> se*or à forte regulamenta**o como fator *edutor d* assimetria informacional. Os dados * </line>

<line> analisado* cobre* * pe*íodo de 2010 a 2*17 por m*** de um p*inel est*tico, e abrangem um* </line>

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<line> amos*r* de 57 em*r*sa* do s*tor e*é*rico. Utilizamos as informações *ontidas </line>

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<line> de**nstrações finan*eiras extra*das *o banc* </line>

<line> [B] 3 de s*u website *ara fins </line>

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<line> divu*ga*ão. Relatórios financeiro* de a*ta qual*dade devem a*mentar </line>

<line> a ef**iência *o </line>

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<line> invest*mento. *lém disso, a redução da seleção a*versa * *o risco mora* aumen*a * **a*i*ade </line>

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<line> d*s *nform*ções </line>

<line> dos rel*tór*os **nanceiros * permite que os gestores identi*iq*em *elhores </line>

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<line> oportunidades de in*estimento. D*ante </line>

<line> disso, a hipótese *e*ta *esq*isa é que ex*st* uma </line>

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<line> *e**ção significa*i*a e positiva entre a q*alidade dos ganhos e * ef*c*ência d* inv*stimento **s </line>

<line> e*p*esas de ene*g*a elétrica listad*s em [*] *. ** *esulta*os indicaram uma relaç*o positiva </line>

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<line> entre a qualidade dos </line>

<line> lucro* * a eficiênc** d* </line>

<line> invest*mento, es*ec*alm*n** mitig*n*o </line>

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<line> sobr**nvestimen*o. Esses resultados co*roboram es**do* r*ali*ados em economias </line>

<line> *esenvolv*das. N* entanto, a ma**r qualidade *a informaçã* não atenua * sub*nv*s*im*nto. </line>

<line> Palavras-ch**e: *ficiência de I*v**timent*. Qual*dad* da Info*maçã*. *e*or Elétric*. </line>

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<line> *ev. FSA, **resina, v. 18, n. 04, art. 3, p. *7-67, abr. *02* </line>

<line> www4.fsan*t.com.br/revista </line>

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<line> *arnings Qu*lity and Inv*s*me*t Ef*iciency: *n Ana*ysis of Elect**c**y Compa*ies Listed in B3 </line>

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<line> * INTRO*UCT*ON </line>

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<line> Capital *nvest*e*t d**isio*s are a key factor in de*erm*ning the value *f *he c*mpan* </line>

<line> *nd, therefo*e, inve**or we**th. The ma*n *et*r*inants for a company *o make efficient </line>

<line> **v*stme*t d*cis*on* include spe*ia*iz*d and d*dic***d manage*ent teams a*d su*ficient </line>

<line> capital resources. Previous literatu*e sho*s that high-quality financia* reporting and corpor*te </line>

<line> governance mechan*sms can h*lp prevent or miti*at* *ubopti*a* inves*ments b* discipl*ni*g </line>

<line> *a*ager *ehavior *nd r*d*cing *he cost of capita* (CHEN, XIE; ZHANG, *017). </line>

<line> P**viou* *e*ear** highli*h*s that h*gher-quality fin*nc*al r*po*ting *ho*ld increase </line>

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<line> investment </line>

<line> efficie*cy (B**H*AN; SMITH, 2001; HE*L*; PALEPU, 20**; LAMBERT; </line>

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<line> LEUZ; VER*ECCHIA, 2007), *nd companies ca* *educe i*fo*m*tion *symmet*ie* </line>

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<line> increa*ing the quality of *hese re**rts (BUS**AN; </line>

<line> SM*TH, 2001; HEA*Y; *ALEPU, </line>

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<line> 20*1). Surveys (B*DDLE; HILA*Y, 2*06; BIDDLE; *ILARY; VE*DI, 20*9; *H*N et al., </line>

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<line> MCNICHOL*; STUB*EN, 2008) suggest that reducing *dverse sele*ti*n an* mor*l </line>

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<line> hazard i*creas*s the *uality of financial reporting inf*r*ation and all*ws managers to </line>

<line> id*ntify **tter *nvestment oppo*tun*ties. </line>

<line> C**sistent with the a*gum*nt that **e reduction *f adverse s*lection and mo*a* hazard </line>

<line> incr*ase* t** quality *f information, Bid*le et al. (200*) and B*dd*e an* Hilary (2006) f*und </line>

<line> **at f*rms with higher-*uality *inan*ial re*o**ing invest more efficiently, which is repre*ented </line>

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<line> *e*sit*vity. Howe*er, this *en*itiv**y ma* reflect fun*ing </line>

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<line> c*ns**aints *r *xcess cas* (FA*ZARI; HUBBARD; PETERSEN, </line>

<line> 2000; KAPLAN; </line>

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<line> ZINGALES, 2**0). *hese resu*t* rais* the additional que*tion of wheth*r low*r *ual**y *f </line>

<line> information r**at*s to overi**e*tm*n*, underin*est*e*t, or *oth. </line>

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<line> I* practic*, compa*ies may face some fund*ng </line>

<line> constraint* that lim*t the ability *f </line>

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<line> manager* to carry *ut </line>

<line> all p**jects with posi*ive *PV (e.g., Hubba*d, 1998). In theory, </line>

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<line> h*wever, compa*ies ar* *ikely to obtain funding for all projects with positive **V and *ill </line>

<line> *ont*nue to invest until the margi*al ben*fit of the investment equals the mar*ina* co*t (e.g., </line>

<line> *aya*hi, 1982). I* is noteworthy in **is co***xt that *nvestment op**rt*nities are t*e single </line>

<line> dri*er of the invest*ent policy of a f*rm (MODIGLI*NI; MI*LER, 1958). </line>

<line> Previ*us litera*ure *as shown tha* friction i* the capital mar*et can di*tor* the optimal </line>

<line> investm*nt of fi*ms (**EN; *ILL; VAN*E, 2*14), which lead* to o*erinvestment or </line>

<line> un**rinvestment. Overin*es*ment occurs when manage*s inve*t ineffe*ti*ely, selecting *oo* </line>

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<line> projects to expropriate the exi*ting r*sou*c*s of c**panie*. O* </line>

<line> th* other hand, </line>

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<par>

<line> u**erinvestment occurs *he* companies facing fun*i*g constraints move aw** f*o* projects </line>

<line> **v. FSA, T*resina PI, v. 18, n. *4, a*t. 3, p. 47-67, *br. 2021 www*.fsan*t.com.br/revista </line>

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<line> E. M. F. Costa, T. P. Fernandes, J. P. Silva, R. M. Noril*er </line>

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<line> wit* posit*v* NPV due t* th* high cost of raisi*g capit** (e.g., BIDDLE et al., 20*9). *oth </line>

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<par>

<line> si*uations coul* relate to </line>

<line> p*or qua*ity of in*ormation, since th*s is *n *mp*rtant featu*e *f </line>

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<par>

<line> financ*al reporting that aff*cts the efficient alloc*ti*n </line>

<line> of *es*urces (DEME*JIAN; LEV; </line>

</par>

<par>

</par>

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<line> It is notewor*hy t*at studies show the *os*tive rela*io*ship between financial re*ortin* </line>

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<line> quality and investment efficienc*, above </line>

<line> all, in de*e*op*d countries, such *s t*e USA (e.g., </line>

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<line> **e European Union, with littl* evidence in eme*ging </line>

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<line> countries (CHEN et al., 2011). F*nd*ngs </line>

<line> differ when </line>

<line> considering *he Braz*lia* </line>

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<par>

<line> scenar**, whi*h has sig*i*icant </line>

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<line> Chi*s and companies *ess consolidated in the ma*k*t an* with hi*her *isk, s*all-caps </line>

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<line> mid-ca*s. *hen taking greater risks, manage*s m*y *arr* out projects th*t do not alway* ad* </line>

<line> For the *raz*lian context, previ*us literature shows low** Financia* Reporting Qua*ity </line>

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<line> (***) in priva*e c*mpanies, presumabl* due to t*e </line>

<line> lower mar*et d*man* fo* public </line>

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<line> *nfor*ation. The quality *f </line>

<line> this reporting is l*wer in c*untri*s with low investor pr*tection, </line>

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<line> bank-oriented finan*ial syste*s, and greater conf*rmity betwee* tax *nd f*nan*ial </line>

<line> report**g </line>

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<par>

<line> rules (CHEN et *l., 2011). In emerging marke*s, private c**pan*es finan*e investme*ts *rom </line>

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<line> including bank l*ans, private </line>

<line> equ*ty iss*e*, *ea*ing, *omme**ial credit, </line>

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<line> finan*ing **om special development agencies or g*vernments, and </line>

<line> info*mal financi*g - </line>

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<line> from r*tained earni*g* and addit*onal **ntrib*t*ons fr*m owners (BECK; DEMIRGUC- </line>

<line> A large body of *iterat*re *ocuments how the av*ilab*l*ty of external or interna* fu*ds </line>

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<line> affec*s </line>

<line> decisions (BLANCHAR*; LOPE*-D*-SILANES; SHLEIFER, </line>

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<line> MYERS; *AJLU*, 1984). These s*u*ie* *sed s*mpl*s of </line>

<line> publicly traded companies that </line>

</par>

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<line> de*end m*inly on capit*l and d*bt financing. F** pr*vate companie*, external fundi*g sources </line>

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<line> are generally lim*ted </line>

<line> a** consist mainly </line>

<line> of bank loans *n* com*ercia* credit. On the other </line>

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<line> hand, *he presen*e of regulation in s**e sectors, s*ch as electricity, can mitigate risks, </line>

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<line> *specially </line>

<line> overinvestmen* and underinvestment. Th*s, empirical evidence i* devel*ping </line>

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<line> countri*s *t*** rep*ese*ts a gap t* </line>

<line> be filled, especially in sectors with large amoun*s o* </line>

</par>

<par>

<line> investments, as is the c*se *n the electricity sector. </line>

<line> Acc**ding to *** *a*ional *l*ctr*c Energy Agen** (ANEEL, 201*), the ele*tricit* </line>

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<line> su*sector in Braz*l has widely dispersed p*wer ge*er*tion network, wit* 2,661 gen*r*ting a </line>

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<line> *rojects and an i*stalled capacity of 118,886,137 kW. The*e fac*ors s*ow the *ize </line>

</par>

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<line> importan*e of this *ub*ector for the countr*. Despite dispersion, comp*nie* *perate most*y in </line>

</par>

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<line> Earning* Quality a*d Investment Ef*icienc*: An Ana*ysis of Electricity Compan*e* *isted in B* </line>

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<par>

<line> the *orm of na*ural *o*opolies. The importance of th*s s***ector, given its prom*nent role in </line>

<line> the coun*r*\s econom* by prod*cing a *r**ar* input in *he prod*ction chain, r*late* ** the </line>

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<par>

<line> reg*lation of its </line>

<line> accou*ting pra*tices. Regulati*n inte*d* *o avoid surprise* in the *i*ancial </line>

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<par>

<line> health o* compan*es in the s*ctor, and, conseque*tly, prevent the interrupti*n in the supply of </line>

<line> *he National Ass*ciatio* of Ener*y Co*sumers (ANACE, 2*18) co*s*ders tha* the </line>

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<line> electricity subs*c*or </line>

<line> in Br*zil i* la*gely institutio*alized through sev*ral bo*ies, </line>

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<par>

<line> N*tional Energy Policy C*uncil (CN*E), Min*s*ry of Min*s and E*erg* (MME), Electricity </line>

<line> Secto* M*ni*oring Com*itte* (CMSE), E*ergy Research Company (EP*), AN*EL, National </line>

<line> *y*tem O*erator (*NS), *lec*ric Energy Trading *hamber (CCEE), and El*trobras (which </line>

<line> *cts as a holding o* state-owned co*p*nies). The creati*n of Law No. 12,*83/2*13 is also </line>

<line> w*rthy ** attention. This law provi*es that ene*gy gen**atio* and transmiss*on companies </line>

</par>

<par>

<line> renew their concession </line>

<line> contr*cts in advance, w*ich allows ANEEL to regulate the </line>

</par>

<par>

<line> prices charg**. Thi* *ontext corroborates t*e c**cept*on that regulation in the referred sector </line>

<line> is active and ongoing (Silv*, Bo*g*s, Go*çalves & Nascim*n*o, 2017). </line>

<line> Bas*d on *he previously highlighted conte*t and on the reasons listed, the *esear*h </line>

<line> *r*blem resum*s i* the following ques*ion: what is t** relatio*s*ip between *arni**s </line>

<line> quality and invest*e*t efficiency of publicly *rad*d Brazilian companies in t*e </line>

</par>

<par>

<line> ele*tricit* subsec*or? To answer the research </line>

<line> problem, this investigation analyzes </line>

</par>

<par>

<line> re*ationship between </line>

<line> *hese va*ia*les in *l**tr*cit* companies </line>

<line> listed in Brazil, Bolsa, *alcã* </line>

</par>

<par>

</par>

<par>

<line> The firs* mot*va*i*n of this study is the absence *f em*i*ic*l stu**es *n the efficie*cy </line>

</par>

<par>

<line> of **vestme*ts in eme*gi*g econ*mies, particularly in t*e **azilian context, *n </line>

</par>

<par>

<line> compani*s vary largely in size. Res*ar*h o* investment efficienc* mostly ad*ress devel*ped </line>

<line> countries. Few studies have *ocus*d on em*rgi*g markets, whi** have a we*ker *ontrol and </line>

</par>

<par>

<line> mon*toring system. T*is weaker con*rol all*ws great** expropri*tion by </line>

<line> the manager, </line>

</par>

<par>

<line> e*peci*ll* r*gard*ng *inority sharehol*ers. Und**stan*ing thi* *elationship is *ve* mor* </line>

<line> es*enti*l fr*m th* point of v*ew o* investors, who *ave *inancial repo*ts *s their main sou*ce </line>

<line> of info*mation and us* a*counting numb*rs in resource allo*ation *ecisions. </line>

</par>

<par>

<line> Moreo*er, the studies analy**d did no* addr**s the </line>

<line> relat*onsh*p be*ween </line>

<line> e*rnings </line>

</par>

<par>

<line> qua*ity *nd i*vestment efficienc* i* spe*ifi* *ecto*s, e*pec*ally in reg*lat*d envi**nment*. </line>

</par>

<par>

<line> This resear*h </line>

<line> anal*zes m*n**er behavior in te*** of in*estment e**iciency an* </line>

<line> earnings </line>

</par>

<par>

<line> quality i* the Br*zi*i*n elect*i**ty sector. *onsideri*g the impor*ance of this sector, especial*y </line>

</par>

<par>

<line> rega*ding the a**unt of *un*s raised in the mark*t, the *rese*t research hi*hl*ghts </line>

</par>

<par>

<line> Rev. FSA, Te*esina PI, v. 18, n. 04, ar*. *, p. 47-67, abr. 2021 www4.*sanet.co*.br/rev*sta </line>

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</page>

<page>

<par>

<line> E. M. F. Co*ta, T. P. Fernandes, *. P. Silva, R. M. Noril**r </line>

</par>

<par>

<line> relations*ip be*w**n th*s* f**tor*, and *** be useful to inve*tors and other research**s. </line>

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<par>

<line> 2 LITERATURE R*VIEW AND HYPO*HESIS DEV*LOPMEN* </line>

</par>

<par>

<line> Dechow, Ge an* Schrand (2010) define earn*ngs quality b**ed on SFAC No. 1, </line>

<line> paragrap* 42, which states that fina*cia* *eports *ust provide informa*ion about the financial </line>

<line> *erformance of a *omp*ny over * given period. Th*s, "**gh-quality e*rnings provide more </line>

</par>

<par>

<line> i*formation about financial </line>

<line> performance charact*r*stics of a firm, w*ich are impor**n* fo* </line>

</par>

<par>

<line> dec**ion maker to make a spe*if*c decision". </line>

<line> One of the purpo*es of *inancial re*orting *s *o facilitate efficient capit*l a*location. </line>

</par>

<par>

<line> An i*po*t*nt aspect *f this role is </line>

<line> **provi** i*vestment dec*sions (CHEN et al., 2011). </line>

</par>

<par>

<line> Spec*f*cal*y, the t**ory suggests that improving fi*anc*al tra*spar*ncy al**v*ates </line>

</par>

<par>

<line> underinvestment </line>

<line> and overinvest*e*t problem*. Recen* s*udies su*p*rt this pr*diction </line>

</par>

<par>

<line> (BID*LE; HILARY, *006; BIDDL*; HILARY; VERDI, 2009; CHE* et a*., ***1; HOPE; </line>

<line> A large part *f the r**evant literature associate* earnings quality (EQ) with **vestme*t </line>

<line> effic**n*y (*ENLEMLIH; BIT*R, 2018; BI*DLE; HI*A*Y, 2*0*; BIDDLE; H**ARY; </line>

<line> VERDI, 2009; B*SH*AN; SMITH, *001; CHEN et al., 2011; ELAOUD; JAR*OUI, *017; </line>

</par>

<par>

<line> GO*A*IZ; *ALLESTA, 2013; HAB*B; *ASAN, </line>

<line> 2017; H*ALY; PALEPU, </line>

</par>

<par>

<line> LAMBER*; LEUZ; VER***CHIA, 2007; MAN*E* *t al., **16). I* this regard, stud*es </line>

<line> *ave shown th*t higher-quali*y financial reporting cou** increa*e *nve*tm*nt efficiency </line>

</par>

<par>

<line> (BIDDLE; HILARY, *006; BUSHMAN; SMITH, 2001; HEALY; PAL*P*, </line>

</par>

<par>

<line> LAMB*RT; LEUZ; VER*ECCHIA, 2007), le*ding to lowe* *nvestment-cash *low </line>

<line> sensitivity (*ID*LE; HI*ARY, 2006; BIDDLE; HILARY; VERDI, 2*0*). </line>

<line> These surveys highlight that higher e*rning* quality (EQ) mak*s **nagers more </line>

<line> re*po*sible, **l*wing bett*r monito*ing, reduci*g adver** sel*c*ion and moral *aza*d, a*d </line>

</par>

<par>

<line> hence reducing </line>

<line> in**rmation asymmetr*es, which </line>

<line> can miti*ate underinv*stment *nd </line>

</par>

<par>

<line> *verinvestm*nt pr*blems (ELAOUD; JAR*OU*, 2017; GOMARIZ; BALLESTA, 2013). I* </line>

</par>

<par>

<line> additi*n, EQ could </line>

<line> improve investment </line>

<line> efficiency, all*wi*g m*nagers to make better </line>

</par>

<par>

<line> decisions through be*ter identi*icatio* *f the most accurate projec*s a*d accounting p*o*its f*r </line>

<line> i*ternal de*ision m*kers (BUSHMAN; *M*TH, 2001; GO**RIZ; B*LLESTA, 201*; </line>

<line> MCNICHOLS; *T*BBEN, 2*08). M*reover, it could h*ghlight th* ability of m*nag*rs to use </line>

<line> the resources entrusted to them (*RAN*IS; HUANG; ZANG, 2008; HABIB; HASAN, </line>

<line> Rev. FSA, Te*esina, v. 18, *. 0*, art. 3, p. 47-*7, *br. 2021 w*w4.fsanet.com.*r/revista </line>

</par>

</page>

<page>

<par>

<line> E**nings Qu*l*ty an* Investment E*ficiency: An A*alysis o* Electricity Companies Lis*ed in B3 </line>

</par>

<par>

<line> From an e*fic*en* contracting </line>

<line> perspe*tive, mo*e a*le *an*gers would invest more </line>

</par>

<par>

<line> effic*e*tl* compare* to their less able peer*. Mor* abl* m*nagers </line>

<line> are mo*e e*ficient *n </line>

</par>

<par>

<line> evalu**ing the </line>

<line> t*m*ng and econo*ic returns on investm**t, as well </line>

<line> as i* synthesizing </line>

</par>

<par>

<line> *nform*tio* in reliable estimates of t*e *isks a*d re*urns associat*d wi*h corporate i*vestm**t </line>

</par>

<par>

<line> (DE*E***AN; LE*IS; M*V*Y, 201*; HABIB; HASAN, </line>

</par>

<par>

<line> likely to signal positively </line>

<line> f*rm\* value </line>

<line> compared *o their *ess abl* </line>

<line> cou*te*parts </line>

</par>

<par>

<line> through forec*st dis*losures. In contrast, the prospect of inc*me </line>

<line> extraction shows that </line>

</par>

<par>

<line> mo*t abl* *anagers overvalue their perso*al improvement in their careers and, in doing so, </line>

</par>

<par>

<line> take *ctions that ca* worse* the *irm\s **st*. For **ample, mo*e </line>

</par>

<par>

<line> overconfident and thus overestimate </line>

<line> the retu*ns on corpora** inve*tment (HABIB; HA*AN, </line>

</par>

<par>

<line> 2017). Empirical evidence revea*s that **cessive ma*ager*al con**denc* can distort corpor*te </line>

</par>

<par>

<line> investmen* decisions (HUANG et al., 2011) </line>

<line> and ***d to value-de**roying mergers </line>

</par>

<par>

<line> (MALMENDIE*; T*TE, 200*). In this c*se, *igher EQ would mitigate *he effects of debt </line>

<line> extraction, esp*cially by *rovi**ng investors wi*h more relevant and reliable inf*rmation. </line>

<line> A l*rge body of literat*re shows that co*pa**es can improve *he quality of account*ng </line>

<line> inf*rmat*on. Acc*rding to neoclassical t*e*ry, companies invest u*til the marginal benefit is </line>

</par>

<par>

<line> the margin*l cost o* </line>

<line> that investment so a* to **ximize va*ue* </line>

<line> (HAYASHI, 19*2; </line>

</par>

<par>

<line> YOSH*KAWA, 1980). In the Keynesian *r*me*ork, th* pr*ference for *rowth or financia* </line>

</par>

<par>

<line> de*erm*nes investm*nt (CROTTY, 1992; GORDON, *992). *n the </line>

<line> agency </line>

</par>

<par>

<line> f*amewo*k, *hich considers infor*ati*n asymmetry problems, firms ma* devi*te *rom thei* </line>

<line> optimal inv*stment levels (*HE* et a*., 2011) and th*re*o*e suf*er from overinvestment or </line>

</par>

<par>

<line> un*er*nve*tmen*. I* agency </line>

<line> *heory, howev*r, several *ontrol m*c*anisms mit**ate </line>

</par>

<par>

<line> informati*n asymmetries and i*formation *isk. **ese mechanisms also allo* better </line>

</par>

<par>

<line> s**ervision </line>

<line> *f *an*gement *c*ivi*y, mitigating th* </line>

<line> opportunistic behavior of managers, </line>

</par>

<par>

<line> e*pec*ally with regard to ear***gs m*nage*ent, thus improv*n* ea*nings quality (ELAOUD; </line>

</par>

<par>

<line> JARBOUI, </line>

<line> 2017; GOMARIZ; BA*L*STA, 2013; HEALY; PALEPU, 2001; H*PE; </line>

</par>

<par>

<line> THOMAS, </line>

<line> MAR*ÍNE*-FERRERO; </line>

<line> GARCIA-SANCHEZ; </line>

<line> C*ADRAD*- </line>

</par>

<par>

<line> BALL*STEROS, 2*15). </line>

<line> Hir*hleifer, Ho*, Teo* *nd Zh*ng (2004), *i*dl* e* al. (200*), and C*en et *l. (2011) </line>

</par>

<par>

<line> examine the effe** of inf*r*ation qualit* on two in*fficient sc*narios, </line>

<line> ove*investment </line>

</par>

<par>

<line> underinve*tment. </line>

<line> *uthors </line>

<line> r*porte* </line>

<line> higher </line>

<line> i*formation </line>

<line> helps </line>

</par>

<par>

<line> underinvest*ent c*mpanie* to make investm*nts, and overinvestment c*mpanie* *o dec*eas* </line>

<line> their investmen* *evel. In line with the evidence t*at ear*i*gs management leads to </line>

</par>

<par>

<line> o**rinvestment *ecause it distorts the information </line>

<line> by *anagers (MC**CHOLS; </line>

</par>

<par>

</par>

</page>

<page>

<par>

<line> *. M. F. C*sta, T. P. F*rnan**s, J. P. Silva, *. M. *or*ller </line>

</par>

<par>

<line> STUBBE*, 20*8), </line>

<line> hi*her-quality i*formation mitigates ove*investment </line>

<line> *nd, con*equently, </line>

</par>

<par>

<line> man*gement. </line>

<line> con*e*vatism </line>

<line> reduces </line>

<line> *v*rinves*ment </line>

</par>

<par>

<line> u*derinves*ment, **cau*e i* red*c** investment-cash f*ow sensitivity in *verinvestme*t firms </line>

</par>

<par>

<line> *nd facilit**es access to </line>

<line> external fina*cing *n und*rinve*tmen* firms (ELAOUD; JARBO*I, </line>

</par>

<par>

<line> *017; GOMARIZ; B**LESTA, 2013). *ur*hermore, cons*rva*i*m re**ces ag*ncy problems </line>

<line> related to managem*nt decisions, *itiga*i*g *anagerial oppo*tun**m a*d allowing good debt </line>

</par>

<par>

<line> agreements *n an asymmetric i*formation </line>

<line> envi**nment (*HMED; DUELLM*N, 2*07; </line>

</par>

<par>

<line> BALL; SHIVAK*MAR, 2*05; GARC*A LARA; GARCIA OSM*; PE*ALVA, 2009; </line>

<line> GARC*A-MEC*; *ARC*A-SANCHE*, 2018; LEVE*TIS; D**ITR*POULOS; OWUSU- </line>

<line> Previo** literatur* also shows that private compa*ies ha*e l*wer F*nancial Re*ort*ng </line>

<line> Quality (F*Q), presumabl* due to the lower ma*ket dema*d for p*bl** information. The *RQ </line>

</par>

<par>

<line> ** lowe* in countries w**h low investo* protection, bank-orie*ted fi*ancial s*stems, </line>

</par>

<par>

<line> gr*ater conf*rmity </line>

</par>

<par>

<line> char*cte*istics are co*mon in civil law countries, especially Br*zil. R*search points to a </line>

</par>

<par>

<line> greater ten*enc* ** earnings man*gement in these </line>

<line> countries compared with countries </line>

</par>

<par>

<line> charact*rized by com*on la*, capi*a* ma*ket-based fina*cing, stron* accou**ing pr*fessi*n, </line>

<line> hig* level of development, and a*equa*e accoun**ng education (ALI; HWAN*, 2000; *ALL; </line>

<line> KOTHAR*; RO*IN, 2000). </line>

<line> In emerging ma*kets, private *omp*nies *inance investmen*s *rom outside sources - </line>

<line> i*clud*ng bank loan*, private equi** issues, leasing, commercia* *red*t, financin* fro* special </line>

<line> *evelopmen* agencies or go*e*nments, *nd *nformal finan*ing (*in*n*in* from loan s*arks, </line>

</par>

<par>

<line> fami*y, a*d fr*ends) - a*d f*o* retained </line>

<line> earnings and additional co*tr**uti*n* from </line>

<line> owners </line>

</par>

<par>

<line> (BECK; *EMIRGUC-K*NT; MAKS*MOVIC, 2008). A large body of literature docume*ts </line>

</par>

<par>

<line> the availabi*ity of external or </line>

<line> *nternal fu*d* aff*c*s investment de**sio*s </line>

</par>

<par>

<line> (B*ANC*ARD; LOPEZ-DE-S*LAN*S; SHLEI**R, 1994; M**R*; MAJLUF, 1984). </line>

</par>

<par>

<line> These studies used samples of publicly t**ded compan*es </line>

<line> th*t depen* mainly on capi*al </line>

</par>

<par>

<line> external funding source* are generally lim*ted </line>

</par>

<par>

<line> consist main*y of *a*k loans a*d commercial credit. Without a**r*ctive *omes**c investm*nt </line>

<line> op*ortunities, man***rs *f these *om*anies *hoose to keep u*expe**ed cash i*side the </line>

<line> compa*y, ra**er t*a* dis*ributing it to investors in the fo*m of *iv*de*ds, shar* *e**r*hases, </line>

<line> or debt red*ction. </line>

<line> Chen et al. (2*1*) **s* a*gue tha* the fun*ing source will aff*ct the relati*ns*ip </line>

<line> between FRQ and investment ef*iciency. Bank loans a*e the most commo* s*ur*e of external </line>

<line> *ev. FSA, Teresina, v. 1*, n. 04, art. 3, p. 47-*7, abr. 2*21 www4.fs**et.com.br/revis*a </line>

</par>

</page>

<page>

<par>

<line> *arni*gs Q*ality and I**e*tment Effic*ency: An Ana*ysi* o* El*ctricity **mpanie* Listed i* B3 </line>

</par>

<par>

<line> capital for *rivate c*mpa*ies </line>

<line> *n develo*ing countries (BECK; DEMIR*UC-KUNT; </line>

</par>

<par>

<line> MAK*IMOVIC, 2008). T*is *s due to *inancial diff*culti*s, real*oc*ti*n of re*ources, </line>

</par>

<par>

<line> accepta*ce or reject*on </line>

<line> of investments. Banks *an *ccess in*ormat*on oth*r th*n financi*l </line>

</par>

<par>

<line> st*tements, po*ent*ally *e*uci*g **e i*port*n** of t*e account**g i*formation disclose* i* </line>

<line> financi** repor*s. Howe**r, in addition to the l*rge body of *esearch do*umenting the ro*e of </line>

<line> **counting information for lending d*ci**ons in the US and *ther d*veloped *ountries, th*re is </line>

<line> also evidence that b**k* rely on bo*rowers\ finan*ial reports in *redit *ecisions in emergin* </line>

<line> market* (a* is t*e case in Brazil) and for s*all *irms (*ERRY; GRA*T, 200*; BER*Y; </line>

<line> FAU*KNER, 1993; DANOS; H*LT; IMHOFF JR, 19*9). In c*mparison wit* o*her *xternal </line>

<line> capi*al *roviders that r*ly mor* *n **tual trust and priv*te communication, *anks *re li*ely </line>

<line> to examine the fina*cial *tatements of corporat* clients more car*f*lly. </line>

<line> The rel*tio*ship b*twe*n earnin*s quality *nd investment eff*ciency in emerging </line>

</par>

<par>

<line> (*specially Brazi*) shows that higher EQ *akes manage*s *ore res*onsi*le, </line>

</par>

<par>

<line> allow*ng bet*er monitorin*, reduci*g advers* selection and mor*l haz*rd, and *ence reducing </line>

<line> in*ormation asym**tries. In other wor*s, higher EQ could impro*e inv*stm*nt efficiency </line>

<line> (ELAOUD; JARBOUI, 2017; GOMARIZ; BALLESTA, 2013; BUSHMAN; *MITH, 20*1; </line>

</par>

<par>

<line> MCNICH*L*; STUBBEN, 2008). With this i* mi*d and co*sideri*g the p*r*icular**ies </line>

</par>

<par>

<line> these e*erging ma*k*ts and th*ir main source* of financing, we elabor**ed *he *ollowing </line>

<line> = there is a *ignifi*ant *nd posi*ive relationship betwee* ear*ings *u*lity *n* </line>

<line> in*estment effici*ncy of electricity compa**es *isted in B*. </line>

<line> Consi*eri*g that reducin* infor*ation a*ymm*trie* can mitigat* un*erinvest*en* and </line>

<line> over*nvestme*t prob*ems (*LAOUD; JARBO*I, 20*7; GOM*R*Z; BALLESTA, 2013), we </line>

<line> elaborated t*e following hypothes*s: </line>

</par>

<par>

<line> = th*re is a signifi*ant and positive relation*hi* between earnings </line>

</par>

<par>

<line> investment *fficiency in a sce*a*io of overinv*st*ent in electr*ci*y companies l*s*ed *n B3. </line>

</par>

<par>

<line> = *h**e i* a signi*ican* and positive relationship be*we*n earning* </line>

</par>

<par>

<line> investmen* **f**ienc* i* a scena*io *f unde*inve*tment in elec**ic*ty **mp*nies listed i* B3. </line>

<line> 3 M*TH*DOLOG* </line>

<line> This research used d*ta from th* financial sta*ements published *nd made a*ail*ble *n </line>

<line> the website of Brasil, Bolsa, Balcão [B]3. *he sample initially comprised 5* comp*n*es in the </line>

<line> Rev. *SA, Tere*ina PI, *. 18, n. 0*, art. 3, p. 47-67, **r. 2021 www4.fsanet.com.*r/revista </line>

</par>

</page>

<page>

<par>

<line> E. M. F. C*sta, T. P. Fe*nandes, J. P. Silva, R. M. N*riller </line>

</par>

<par>

<line> electricity secto*. The data *n*l*zed covers *he p*riod *rom </line>

<line> 2010 to 2*17. The fin*l *ample </line>

</par>

<par>

<line> consisted o* 57 companies, *heref*re without excl*sion. </line>

</par>

<par>

</par>

<par>

<line> Conceptua*ly, investment e*ficien*y means u*d**taking all projects with *ositive a </line>

<line> NPV. Biddle, Hil*ry and *er*i (2009) and Gomariz and Ballesta (2013), among others, use a </line>

</par>

<par>

<line> mod*l *hat consi*ers *nve*tment *n *er*s </line>

<line> of gro*th opportunities. Speci*ica*ly, in**stment </line>

</par>

<par>

<line> eff*cien*y wi*l ex*st when there </line>

<line> i* no deviation from t*e *xpected level of investmen*. </line>

</par>

<par>

<line> However, the*e are fir*s **at inv*st ab*ve the ideal value (p*siti** deviati*** from the </line>

</par>

<par>

<line> exp*cte* investment), *hile </line>

<line> there a lack is </line>

<line> *f investment for those th*t do not carry out al* </line>

</par>

<par>

<line> p*ofitable projects (negat*ve deviations f*om th* exp*cted in*estment). </line>

<line> To esti*ate the expected level of i**e*t*e*t for firm i i* year *, ** spec*fy a mode* </line>

</par>

<par>

<line> that pr*dicts *he le*el of *n*est*ent *ased on growth opportunities (as me**ured </line>

<line> by sales </line>

</par>

<par>

<line> growth). Devi**ions from the model, reflected in the error term of the inves*m*nt m*del, </line>

<line> represent investment ine*ficiency (BI*DLE; H*LARY; V*RD*, *009; GOM*RIZ; </line>

</par>

<par>

<line> BALL*STA, *013). *he basis fo* me*suring profit ** net profit (NP). Th* metric used </line>

</par>

<par>

<row> measurement of time *eries -, Per*istence (EQ1) (or absence *f it), i* e***l to the residuals o* </row>

<row> the foll*wing reg*ession: </row>

<row> W*er* is the to*al in*estment of firm * in year t, defined as the n*t </row>

</column>

<par>

<line> incr*ase in t*ng*bl* and in*angi*le ass*ts, and scaled by t*e lagged to*a* assets. </line>

</par>

<par>

<line> rate o* *hange in sales of firm i from t-2 to t-1. </line>

</par>

<row> Th* *esi*uals of the *eg**ssion model r*flect t** deviation from the expect*d </row>

<row> **vestment *evel. We us* these resi*u*ls as a firm-specific proxy for investm*nt inefficiency. </row>

<row> A positi*e res*dual mea** *hat t*e firm is making investments *t a hig*er rate than expected </row>

<row> according to s*les growth, leading to *verinve**ment. In contrast, a ne*ative resi*ua* means </row>

<row> that the actual investment is lo*e* *han expe*ted, cor*e**ond*ng to a scen*rio o* </row>

<row> underinvestment according *o Gomari* an* *al*esta (2*13). </row>

<row> The dependent variable wi*l be the abs**ut* value of *he residuals, c*nside*in* three </row>

<row> sen*r*os: a) the ab*o*u*e value of t*e residuals in module, a **wer *alue means greater </row>

<row> Rev. F*A, T*resina, v. 18, *. *4, *rt. 3, *. *7-*7, abr. *021 *ww4.fs*n*t.com.br/revista </row>

</column>

</par>

</page>

<page>

<par>

<line> Earnin*s Quality a*d In*e*tment Eff*cien*y: An Analysi* of Electr*city Compan*es *isted in B3 </line>

</par>

<par>

<line> efficiency ( </line>

<line> ); b) t*e absolu** </line>

<line> value of posit*v* residuals, considered *s </line>

</par>

<par>

<line> overin**stment, a higher *alue means greater inefficiency t*rough ove*inves**ent; c) the </line>

<line> *bsolut* valu* o* *egative residua*s, con*ide*ed a* underinves*m*n*, multiplied by minu* one </line>

<line> (-1), a **g*er value means greater inefficiency through under*nvestment. </line>

<line> *.2 Ea*nings Quality </line>

<line> F*r *arn**gs *u*lity p*oxy, this research conside*s the studies of Dechow and Schr*nd </line>

<line> (200*); Dechow, Ge *n* *c*ra*d (*0*0), and Perotti and Wagenh**er (2*14). We a*so used </line>

</par>

<par>

<line> t*e earnings *ersist*nce mo*el, </line>

<line> often addre*sed in the literature. The *asis for *easur*ng </line>

</par>

<par>

<line> profit is net pr*fit (NL). The met*ic </line>

<line> use* - m*asure*ent ** *ime series -, Per*istence (EQ1) </line>

</par>

<par>

<line> (*r absence o* it), is equal to the res*duals of *he follo*ing regression: </line>

</par>

<par>

</par>

<par>

<line> NP is the net profit, d*vid*d by total ass*ts at *he beginn*ng *f p*ri*d t. </line>

</par>

<par>

<line> The use of residuals is ju*tified *ince the re*ults of D*chow and Dic*ev (2002) </line>

</par>

<par>

<line> show * negative relationshi* between the sta*dard </line>

<line> *eviation o* the residual *nd per*iste*ce, </line>

</par>

<par>

<line> and betw**n the l*vel of accr*als and p*rs**tence. </line>

</par>

<par>

<line> T*erefore, *e assumed *hree premises, a* *ollows: </line>

</par>

<par>

<line> The higher t** magnitude of accruals (in this ca*e the *esidua*s of Equa*ion 1), </line>

</par>

<par>

<line> th* lo**r the e*rnings quali*y (*ec*ow & **chev, 2002); </line>

</par>

<par>

<line> The lower t*e m*gnitude *f accrua*s (in this c*se the res*duals of Equation 1), </line>

</par>

<par>

<line> the higher the persist*nce (Dech** & Dichev, 2002); </line>

</par>

<par>

<line> Nega*iv* relations*ip betwe*n the st*ndar* deviation of th* res**uals *nd </line>

</par>

<par>

<line> p*rs*sten** (Dechow & Dichev, 2002). </line>

<line> Th**efore, greater volatil*ty of the r*sidu**s in E*uation (*) *an c*rrespond to </line>

<line> lower earning* *uality. We used re*res*ion *esi*uals (2) in this study as a proxy for ear*ings </line>

</par>

<par>

<line> quali** in relation *o pers**te*ce, *** as an indep*nde*t variable in the OL* r*gression </line>

</par>

<par>

<line> Equation (3) - ** tes* the a**ociat*on betw*e* earnings quality and inves**ent *fficiency, </line>

<line> according to model 3. </line>

</par>

<par>

<line> w*w4.f*anet.c*m.b*/revista </line>

</par>

</page>

<page>

<par>

<line> E. *. F. *osta, T. *. Fern*ndes, J. P. Silva, R. *. *oriller </line>

</par>

<par>

<line> 3.3 Model Sp*cificatio* </line>

</par>

<par>

<row> According to *anel da*a, the proposed *od*l to *est the effect of earni*gs quality o* </row>

<row> *nvestment eff***ency is as follows: </row>

</column>

<par>

<line> = Res*duals of Equat**n (1), </line>

</par>

<par>

<line> = Residu*l* o* E*uation (*), </line>

</par>

<row> = C*pital S*r*cture, *easu*ed by the ratio of l*abi**ties s*aled by the to*al assets; </row>

<row> = Firm\s Size, measured *y the log of revenues; </row>

<row> = Cha*ge *n Shareholders\ Equi*y. </row>

<row> We inse**ed co**rol variable* in the mod*l fo* greate* robustness o* res*lts. C**r* 1 </row>

<row> summar*zes *nd ju*tifies the var*ables and their measurement*. </row>

<row> Cha*t 1 - Su*mary of *ariables </row>

</column>

</par>

<par>

<line> Varia*le </line>

<line> Expect*d Sign*l </line>

<line> Justific*tion </line>

</par>

<par>

<line> Expla**to*y *aria*le </line>

</par>

<par>

<line> Persis*e*ce (P*R) </line>

<line> Inc*e*sed pr*fit *uality results in grea*er inves*ment efficiency (He*ly and Pal*p*, 2001; Lambert and **uz a*d Ve*recchia, 20*7). </line>

</par>

<par>

<line> Co*trol V*riable </line>

</par>

<par>

<line> Capital S*ructure (EC) </line>

<line> Positive </line>

<line> De b t matur*ty reduces excess*ve investment (Mello a nd Miranda, 2010) However, the *ole o* debt ma*urity under i*fo*mational asymmetr* has sh*wn that the use of short- **rm de*t is a mechanism *hat can mitiga*e *nforma*ional asymmetrie* and *gency costs betwe*n share*olders, creditors and administrat*rs (Gomariz an* **llesta, 20*3) </line>

</par>

<par>

<line> P*sitive </line>

<line> The size of th* c**pany ha* a posi**ve relat*onship wi*h inv**tme*t efficie*cy, ** evidenced in Lee's (200*) work *ith US publicly trade* compani*s. </line>

</par>

<par>

<line> Chang* in S*areholders\ Equity (V**) </line>

<line> Po*itive </line>

<line> The increase in shareholders' equity may result in greater *fficiency in t*e allocation of invest*ents (Petri*, Capraru and Ihn*tov, *01*; Menguc, Auh a*d Ozanne, 2010) </line>

</par>

<par>

<line> Source: Prepared by the authors. </line>

</par>

<par>

<line> Re*. FSA, Teresina, v. 18, n. 04, art. 3, p. 47-67, abr. **21 </line>

<line> www4.fsanet.**m.br/**vi*ta </line>

</par>

</page>

<page>

<par>

<line> Earn*ngs Quality and I*ve*tmen* *ff*ciency: An A*alysis o* *lect*ici*y *o*pan*es *isted *n B* </line>

</par>

<par>

<line> 4 ANAL*SIS OF RESULTS </line>

</par>

<par>

<line> Table 1 shows the de*criptive st*tistic* of the varia*les adopt*d in the research, in </line>

<line> which: a) in*Ef* had a mean and m*dia* gre*t*r t**n zero, th*s s*owing a si*uation *f </line>

<line> overin*estment grea*er than t*at of und*r*nvestment. Th*s result differ* from t** work by </line>

<line> Gom*riz and *allesta (2013), which presen*e* a *ean and *edian low*r than zero, therefo**, </line>

<line> pr*valen*e o* u*derinvestment; b) *C h*s an av**age o* 0.7*%, demons*rating the p*eva**nce </line>

</par>

<par>

<line> third party *apital in rel*tion *o eq**ty, increasi*g the ris* o* in*estment* in *r*jects o* </line>

</par>

<par>

<line> these co*panies; *) NPV *ith an a*erage of 0.003% and a high coefficie*t of *ariation (i.*. </line>

</par>

<par>

<line> 20%), pos*i*ly *emon*trati*g the low reinvestment of reported profits, mainly </line>

</par>

<par>

<line> due to the *o*sibil*ty of dis*ributing co*stant di*idends; e) TAM has an average of m**e than </line>

<line> R $ *0 milli*n, showing t** *x*stence *f companies, *ostly *onsolidated i* the marke*, such </line>

<line> as Blue Chips and *id Caps. Ho*e*er, there was a high coeffi*ient of var*atio*, also </line>

<line> demonstrating the e*iste*ce o* Sm*ll Caps. </line>

<line> Table 1 - Descriptive statistics </line>

<line> St*ndard </line>

</par>

<par>

<line> Average </line>

<line> Median </line>

<line> *aximu* Minimum </line>

<line> De*iatio* </line>

</par>

<par>

</par>

<par>

</par>

<par>

</par>

<par>

</par>

<par>

</par>

<par>

<line> Source: *r*p**ed by t*e aut**rs. </line>

</par>

<par>

<line> T*rou*h the Variation I*flation F*ctor (VI*), t*ere was *n ev*dent abs*n*e of </line>

</par>

<par>

<line> multico**inearity *f *he *ari*bles adopted </line>

<line> in the research, *h*re*or*, not co*promisi*g </line>

</par>

<par>

<line> estimation of th* researc* equatio*s. In turn, the o*her t*st* were performed, i.*., normality of </line>

<line> resi**es, h*moscedasticity and autoco*re**tion. *s for normality, the Jarqu*-Ber* *est </line>

</par>

<par>

<line> indicated tha* the residues do n*t follow a norm*l distribu*ion. St*ll, the **rmality o* </line>

</par>

<par>

<line> residues wa* not *erified. H*wev**, the **ntral Limit Theor*m (e.g. GUJ*RAT*; PORTER, </line>

<line> 2*11) was *s*d, in whi** **r samples larg*r than 10* obse*v*tions t** norma* distrib*tion is </line>

<line> assumed. </line>

<line> As for the autocorrelatio* of resi*ues, *ts **s*nce was verified th*o*gh the Durbin- </line>

<line> Watson test. For heteroscedasticity, the estimation was p*rfor*e* w*th Whit* *o*rection. *n </line>

<line> a*di*i*n, *tationari*y tests were performed, (a) ADF - Fisher and (b) PP - Fisher, *ndicat*n* </line>

<line> stationarity at the lev*l of the resea*ch v**i*bles, I (0). In t*me, t*e Breusch-Pag** test *n* the </line>

<line> Rev. FSA, Teres**a *I, *. 18, n. 0*, art. 3, p. 47-67, abr. 202* www4.f*anet.com.br/re*ist* </line>

</par>

</page>

<page>

<par>

</par>

<par>

<line> F (*how) test were performed to det*ct th* best model an* t** resul*s </line>

<line> showed the Cros*- </line>

</par>

<par>

<line> section Fixe* (A) as highlighted in Table *. In t*me, considering t*e se*re*ation to *ighlight </line>

</par>

<par>

<line> the re*ationshi* be*wee* quality o* pr*fi* and efficiency of inve*tme*ts in * scenar*o </line>

</par>

<par>

<line> superinvestments and su*investm*nt*, it wa* n*cessary to adop* B and C est*mation, Cross- </line>

<line> s*ctio* Fixed. </line>

<line> Table 2 - Regres*ion Analysis o* the Profit Q*ality a*d Investment Eff*ciency *aria*les </line>

</par>

<par>

<row> R² adjus*ed </row>

</column>

<row> A (Total) </row>

<row> *ross-secti*n </row>

<row> Fixed </row>

<row> t-value </row>

</column>

<row> (Ov*r*nv*stime*t) </row>

<row> Cross-section </row>

<row> t-value </row>

</column>

<row> C(Underin*estiment) </row>

<row> *ross-section *ixed </row>

<row> t-value </row>

</column>

</par>

<par>

<line> Source: Prepared by t*e authors. </line>

<line> In "A" estimation, t*e positive and significa*t 1% relationship between *ER and </line>

</par>

<par>

<line> InvEff w*s *vident. conf*r**ng the first </line>

<line> hypothes*s of the r*search, in conver*e*ce w**h </line>

</par>

<par>

<line> wor*s of *iddle, Hi*ary and Verdi (2009), G*mariz and Bal*es*a (20**), Hea*y *n* P***pu </line>

</par>

<par>

<line> (2001), Lambe**, Leuz a*d *errecchia (200*), so that *ne ca* infer that *h* in**e*se in </line>

</par>

<par>

<line> q*ality of i*f*r*atio*, meas*re* by the *ersist*nce o* *rof*ts, can mitigate th* *n*ff**iency of </line>

<line> inv*st*ent*. *hi* *act may be relat*d to the possi*i*it* of be*te* mon*toring, which wo*ld be </line>

</par>

<par>

<line> *educi*g *d*er*e selection </line>

<line> *nd moral hazard, resulting in * red*ction in infor*atio* </line>

</par>

<par>

<line> asymmetry. </line>

</par>

<par>

<line> Regarding the contro* varia*les, the r*su*t of the estimation sho*ed *n inverse </line>

<line> relations*ip between th* size of the company and *he effi*i*ncy of investments, a* the level of </line>

</par>

<par>

<line> 5%. *h*s fac*or may have bee* caused ** the s*gn*ficant va*ia*ion b*t*een </line>

</par>

<par>

<line> Rev. F*A, *er**ina, v. 18, n. **, art. *, *. 47-67, abr. 2021 w*w4.fsane*.co*.*r/revis*a </line>

</par>

</page>

<page>

<par>

<line> Earn*ngs Qu*lity and Investment Efficiency: An Analysis of Electricity *om*ani** *isted *n B3 </line>

</par>

<par>

<line> companies li*t** in B3, *.e., *h* signif*can* presenc* of Small Caps and Mid Caps, *o*p*ni*s </line>

<line> less cons*lidated in the market **d of *r*ater *isk, w*en comp*red wi*h Blue Chips. Thus, the </line>

</par>

<par>

<line> large* t*e compa*y, mea*ured by the *olu*e of *eve*ues, the </line>

<line> lower *he *ffi*iency of </line>

</par>

<par>

<line> i*vestme*ts. *or the other co*trol variables, *C and NPV, the c**fficients an* statistics were </line>

<line> not statistically significant, th** not allowing greater infer*nces. </line>

</par>

<par>

<line> *on*idering o*ly the scenario *f </line>

<line> overinves*ment, estimat*on "B", the estimation </line>

</par>

<par>

<line> results s*owed a po*itiv* and significant relat*onship at 5% of P** with InvE*f. co**irming </line>

<line> the **cond hypothesis of *he research, *n con*erge*ce wi*h the works of *i*d*e, Hi*ary *nd </line>

<line> Verdi (2009) a*d Goma*iz and Ball*sta (2013), so th*t it can *e inferred that *he inc**ase in </line>

<line> the quality of infor**ti*n, measu*ed *y the p*rsistence of profits, *an mitigate the </line>

<line> ineffic*enc* of in*estmen*s related to overinvestm*nt. *t*e*wise, companies that show higher </line>

</par>

<par>

<line> qua*ity o* i*formati*n, thr*ugh persistence, ena*le mana*ers to better base the*r </line>

<line> *nv**tment </line>

</par>

<par>

<line> de*isions, allow*ng them to reduce **cessive investme**s, *owards the optimal investment. </line>

</par>

<par>

<line> Anothe* </line>

<line> possible i*ference is tha* companies that *ho* greater pr*fit pers*stenc* have mor* </line>

</par>

<par>

<line> e**ici*nt managers in the *llo*ation of resour**s, in order to reduce excess*ve i***stmen*s. </line>

<line> *egarding the contr*l vari*bles, a* inverse relationship was found between capital </line>

<line> structure and invest**nt efficiency, so t*a* the greate* the use of third *ar*y ca*it*l, the lower </line>

<line> t*e investm*nt effici*ncy, at the l*vel o* 5%. This divergen*e evidenced may be related to the </line>

<line> concentra*io* of o*nership in emergi*g co**tri*s, especially i* Braz*lian companies, *ince a </line>

</par>

<par>

<line> *reater concentration o* *wner*hip wo*ld be used *s a co*porate </line>

<line> *overnance mechanism to </line>

</par>

<par>

<line> **tigat* information asymme*ry. Othe*wise, *he incr*ase in the </line>

<line> use of third party </line>

<line> capit*l </line>

</par>

<par>

<line> would increase the ri*k </line>

<line> which m*y incu* in the execution of in*fficient </line>

</par>

<par>

<line> projec**. </line>

</par>

<par>

<line> As f** *he NPV variable, higher equity values *epresent grea*er investm*nt ef*iciency. </line>

</par>

<par>

<line> The compan*es that p*esent the g*e*tes* vari*tion in sharehold*rs' *quity </line>

<line> *re generally </line>

</par>

<par>

<line> growing *ompani*s, whic* ar* align*d </line>

<line> with the reali*a*ion </line>

<line> *alue-gen*ratin* projects. </line>

</par>

<par>

<line> Othe*wise, the **nag*rs of these companies *re more aligned w*th the all**atio* of reso**ces </line>

<line> *n pr*jects that **eate va*ue for sh**ehold*rs. The **M variabl* did not prese*t statist*cal </line>

<line> s**nificance. </line>

<line> S*b*e*uent*y, co*sidering the under*nvestment scenar*o, no statistica* significance </line>

<line> was found between the reducti*n *n InvEff and PER. Thus, it *s *ot possible to infer that the </line>

<line> quality *f pro*i*, *s me*s*r*d b* pe*si*tence, mitigates unde*i*ve*tmen*. For this scenario, the </line>

<line> control variabl*s w*re not statistically significant. </line>

<line> *ev. FSA, Te**sina PI, v. 18, n. 0*, *rt. 3, p. 47-67, a*r. *021 www*.fsanet.com.*r/re*ista </line>

</par>

</page>

<page>

<par>

<line> E. M. F. Cos*a, T. P. Fern*ndes, *. *. Silva, R. M. No*iller </line>

</par>

<par>

<line> Consid*ring *he *arti*ular*ties of the *lectric **ctor i* Brazil, espe*ially *h* strong </line>

<line> regulation, m*na*ers are *ncour*ged to reduce *x*essive investme** or *o *nvest i* pr*j*cts </line>

<line> that *reate value. In other w*rds, the regulat**n *f th* *e*tor *an inf*uence t** quality of the </line>

<line> informat*on evidenced *n t*e financial reports and, at *he same ti*e, a*low the mana*er* of </line>

</par>

<par>

<line> com*anies *ssential informatio* to </line>

<line> r*duc* overin*estm*nt. On the ot*er ha**, these </line>

</par>

<par>

<line> *actors *o not m*tiga*e *nderinve*tm*nt. In th*s way, th* regulation of the Brazilian electr*c*ty </line>

<line> **c*or, the *easure *hat confe*s greater quality of information throu*h persisten*e, *i*iga*es </line>

<line> overin*estment **d does not impact on underinves*ment. </line>

<line> In sh*rt, *he first a*d second hypothes*s o* t*e r*search were *on**r*ed, ie, there is a </line>

<line> p*sitive an* signific*nt relationship be*w*en the ef**cie*cy of th* inves*me*t **d the *uality </line>

<line> of the profit, meas**ed b* the persistence, of t*e *om*anies of t*e electric *n*rgy sub-sector </line>

<line> of Brasil, B*lsa, Bal*ão [B] 3 and there is a positive and sig*ifica*t relationship between *h* </line>

</par>

<par>

<line> eff*ciency of the in*estment, </line>

<line> in a scena*io of over*nvestm**t, with the qu*lity *f p*ofit, </line>

</par>

<par>

<line> measured b* the persistence, of *h* compa*ies in the sub-sector </line>

<line> 5 FI*AL CONSIDER*TIONS </line>

<line> The presen* s*u*y highli**ts the relat*onship between the ef*iciency of in*est*ents </line>

<line> an* the prof*t quality *f co*pan*e* in the B*az*lian elec*ricity sub-se*tor, *olsa, Balcão [*] 3, </line>

<line> c*nsideri*g *s a *ypothesis, *he existen*e *f a positive relationshi* betwe*n pr*fit q*ality and </line>

</par>

<par>

<line> investment e**i*iency. The main </line>

<line> hypot*e*is *as *roken down, distingu*shi*g two different </line>

</par>

<par>

<line> scenario*: a) *verinvestment; *n*, b) unde*investment. The research assumes a po*itive </line>

<line> r*lat*onship between invest**n* *ua*ity and efficiency, in b**h scen*rios, *o that t*e inc*ease </line>

<line> *n the *uality of *rofit mitigat*s both overinvestment and *n*erinvestment. </line>

<line> The r*sults indicate a pos*tive an* signi*ican* 1% r*lations*ip *e*ween the ef*ic*e*cy </line>

<line> of the i*v*s*ments and the quality of the pr*fit, co**irming t*e first hypothesi* *f *he resear**, </line>

</par>

<par>

<line> c*nv*rging with the previou* su*vey*, carried out i* t** E*ropean Unio* *nd </line>

</par>

<par>

<line> Thus, even in emergin* economies, as is the ca*e i* Br*zil, the q*al*ty o* infor*a*ion can </line>

<line> a*low b*tter decisions to *e made by *an*gers, as highl*gh*ed by Bu*hman and S*ith (200*) </line>

</par>

<par>

<line> *nd Ballesta (2013). In addi*ion, anoth*r </line>

<line> factor </line>

<line> may have influen*ed </line>

</par>

<par>

<line> r*s**ts the b*tter monitor*** re*at*d to the high qu*lit* of *rofit, which mitigate* adverse is </line>

<line> selectio* and moral haza*d. T*us, the thre* types of regu*ation practi*ed *y ANEEL (i - the </line>

</par>

<par>

<line> of service standa*ds, </line>

<line> such a* gen*r**ion, transmission, distributi*n an* </line>

</par>

<par>

<line> Re*. FSA, Teresi*a, v. 18, n. 04, art. 3, p. 47-67, *br. 2021 </line>

<line> www4.fsanet.*om.br/revista </line>

</par>

</page>

<page>

<par>

<line> Earnings *uality and Investment *ff*cie*cy: An Analysis of Electrici*y Companies Listed in B3 </line>

</par>

<par>

<line> co*mercialization; ** - the economic re***ation, in relation to tariffs and the m*rket; and, iii - </line>

</par>

<par>

<line> of research </line>

<line> and developme*t </line>

<line> projects and en*rgy efficie*cy) *y re*ucing advers* selection </line>

</par>

<par>

<line> and moral *azard, it raise* *he qua*i** of the inform**i*n s**wn in the financia* reports </line>

</par>

<par>

<line> allow* m*nag*rs t* i*enti*y better investment *p*ortu*it*es. </line>

</par>

<par>

<line> I* could be h*ghlighted, t*e relation*hip between the sou*ces *f financin*, in emer*ing </line>

<line> markets, i* part* d*rected to the ba*king *ector, in line with Chen et al. (*0*1) as it would </line>

</par>

<par>

<line> affec* </line>

<line> the relationship *etween *RQ and in****me*t effi**ency. *owever, *ven though b*nk </line>

</par>

<par>

<line> loans are the *os* c*mmon s*urce *f *oreign *apital *o* privat* compani*s i* deve*op*ng </line>

<line> count*ies, ban*s' access to a*ditional in**r*atio*, in addition to *in*n*ial s*ateme**s, has not </line>

<line> po*entiall* re*uced the impo*t*nc* o* the acc*unti*g i*formatio* disclosed in **n***ial </line>

</par>

<par>

<line> re*orts, for *l***ric power comp*nies listed in B*azil, Bolsa, Bal*ão [B] </line>

<line> 3. *conom*c </line>

</par>

<par>

<line> regul*tion and r*s*a*ch a*d *evel**ment pro*ect* would tend to r**ect proje*ts with a higher </line>

<line> cost of capital, esp*cially those arising from bank *o*ns. In non-regulated sect*rs, **ere may </line>

</par>

<par>

<line> gre*t*r discretion in the use of third party and own capital, allowi*g the manage* t* take </line>

</par>

<par>

<line> greate* *isks in *earc* o* *reater value for s*arehol*ers, resulti*g *n th* executi*n o* projects </line>

<line> financ*d wi*h **i*d pa*** *esources. </line>

</par>

<par>

<line> The s*c*nd hypothesis of *he research was a*so *onfir*e*, since, from </line>

</par>

<par>

<line> can be *nf**red that the incre*se in the qual*ty of informa*ion reduces ove*investment, </line>

<line> conv*rging with Hi*shle*f*r, Hou, T*oh and Zhan* (2004), Biddle et al. (2*09) and Chen et </line>

</par>

<par>

<line> a*. (*01*) who r*ported that high*r quality of informati** helps </line>

<line> *ncoura*e compa*ies of </line>

</par>

<par>

<line> excessive investme*t to decrea*e t*eir level of inve*tmen*. However, </line>

<line> the third </line>

<line> hypothe*i* </line>

</par>

<par>

<line> ca***t be con*irme*; it cannot be inferr*d t*at the incre*s* in the quality of profit mi*igates </line>

</par>

<par>

<line> un*er**ve*t*ent, diverging f*o* Hi*s*leifer, </line>

<line> Hou, Teoh and Zhang (2004), Biddl* et al. </line>

</par>

<par>

<line> (2009) a*d Chen et **. (2011), in whic* hig*er qua*ity of *nformation helps to encou*age low </line>

<line> *nv*stment companies t* make investment*. Conservatism, associate* with regulation, even </line>

<line> facili*a*ing access to exter*a* fi*ancin* in relation to sub-invest*ng companies, could *i*igat* </line>

</par>

<par>

<line> t*e increase in i*vestmen*s, towar*s the o*t*mal level of in*es*m*nts. I* this case, </line>

<line> these </line>

</par>

<par>

<line> *ecu*iar aspects *f emerg*n* market* wo*ld </line>

<line> *e negative*y *nflue*c*n* the r*lati*nship </line>

</par>

<par>

<line> *etwe*n quality of pro*it an* red*ction of *nde*inves*ment. </line>

<line> *he r**ults highl*g*ted in the survey cannot *e generalize* *o other se*tors in Bra*il, </line>

<line> *olsa, Balcão [B] 3 *n* also *o el*ctric energy c*mpanies no* l*sted. A*oth** imp*rtant point, </line>

<line> the research c**not be gen*r*li*ed to the per*od prior to t*e p*o**ss of c*nver*ence to IFRS, </line>

<line> i.e., *rior to the calendar year 20*0. </line>

<line> Rev. FSA, *eresina PI, v. 18, n. 04, art. 3, p. 47-67, abr. 2*21 w*w4.fsanet.com.br/re*ista </line>

</par>

</page>

<page>

<par>

<line> E. *. *. Cos**, T. P. Fernandes, J. P. Silva, R. M. Noril*er </line>

</par>

<par>

<line> *or new research, it is su*g*sted to ver*fy (i) t*e r*lations*i* of investm*nt *ffic*ency </line>

<line> *i** other **oxies of profit qual*ty, (i*) test of the rese*rch hypothesis consi*ering the totality </line>

<line> *f companie* in Br*sil, *olsa, *alcão [B] 3 *nd ( iii) *ons*der *n the sample s*vera* *ount*ies, </line>

<line> *hether de*elo**d or developing. </line>

<line> BIBLIO*RAPHIC REF*REN*ES </line>

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</par>

<par>

<line> Contr*b**ção dos Aut*res </line>

<line> T. P. Fernandes </line>

<line> J. P. Silva </line>

<line> R. M. N*riller </line>

</par>

<par>

<line> 1) concepção e *lane*amen**. </line>

</par>

<par>

<line> 2) an*lis* e interpret*çã* dos dados. </line>

</par>

<par>

<line> 3) *laboração ** *ascunho ou na re*isão críti*a do cont**do. </line>

</par>

<par>

<line> 4) participaçã* *a apr*vaç*o *a vers** **nal do manuscrito. </line>

</par>

<par>

<line> Rev. FSA, Teres*na PI, v. 1*, n. 04, a*t. *, p. 47-67, abr. *021 </line>

<line> www4.fsanet.c*m.br/rev*sta </line>

</par>

</page>

</document>

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