This paper extends the economic growth model tested by Levine and Zervos (1998) by including a measure for capital allocation efficiency proxied by stock price informativeness. Using a sample of 59 countries, this study finds that stock price informativeness as measured by firm-specific return...

When we examine all firms in the sample we find that short-term debt is positively associated with earnings management consistent with some prior studies and the debt hypothesis. However, when we focus on high creditworthy (investment grade) firms we find a negative relation between short-term...