Essays on earnings quality and corporate investment

This dissertation consists of two essays on earnings quality and corporate investments. In the first essay, I test the hypothesis that earnings quality affects corporate investment decisions. Using earnings quality as a measure of financial constraints, I find firms that have low earnings quality are less dependent on internal cash flows for investments than high earnings quality firms. I also find that low earnings quality firms are less dependent on the transitory component of internal cash flows for investments. My findings are robust across different measures of earnings quality, and additional tests suggest that the results are not driven by managerial empire-building.;In the second essay, I examine the corporate investment behavior of firms that have slightly positive or zero earnings. The findings suggest that such firms invest more and suffer from investment inefficiencies. Additional analysis shows that the presence of Big 4 auditors and debt holders may help reduce the investments made by such firms, signaling that external monitoring has an impact on corporate investment decisions.