Nowadays, the effect of geographic location has garnered a lot of attention from financial researches. However, only limited study has conducted research about the firm performance in different location. This study aims to investigate the effect of geographic location on investment efficiency which uses U.S firms data from 1998 to 2017. Geographic location is divided into 3 groups which are urban firms, small city firms, and rural firms. This study found that despite of the disadvantages that rural firms experienced, rural firms show significant and positive result on investment efficiency which implies that rural firms perform more efficiently in terms of their investment compare to small city firms and urban firms. The result is even more pronounced after adding the interaction variable of geographic location and financial reporting quality. This is consistent with the notion that rural firms pre-commit to higher financial reporting quality and subsequently increase their investment efficiency. Furthermore, the result is robust to alternate model specifications since we employ 3 models of investment efficiency and 4 models of financial reporting quality.

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