The prime objective of this thesis is to examine the impact of financial reporting quality (FRQ) on investment efficiency (INVEFF) in Pakistan. For this purpose, we use three distinct measures of FRQ, viz. accrual quality, discretionary accrual quality and discretionary revenue. According to Francis et al. (2005), it is not possible to justify which measure is better than other. Thus, to remove this discrepancy, we create FRQ index by combining the three mentioned measures of financial reporting quality through principal component analysis (PCA) rule. Further, we extend our research by using firm size, financial leverage, financial development and gross domestic product as moderating variable between FRQ and INVEFF. This examination has been carried out for a sample of manufacturing firms listed on Pakistan Stock Exchange (PSX). This study covers the sample period from 2000 to 2016. We conduct this study by using Two Step System GMM estimation technique for estimation our empirical models, developed by Blundell and Bond (1998). Empirical results of this study suggests that higher FRQ increases the INVEFF by mitigating the overinvestment and underinvestment issues. Furthermore, we find that firm size and financial leverage play a critical moderating role to decreases the impact of FRQ on INVEFF. Our results shows that size and leverage not even decreasing the association between FRQ and INVEFF, but it also creates increases the opportunities to the firm’s management to engage in dysfunctional behavior. Moreover, we further, find that financial development and gross domestic product also play a critical moderating role on the association between FRQ and INVEFF. The results represents that developed financial system and higher gross domestic product in a country reducing the market frictions, increasing the growth opportunities and reducing the transaction cost. This will leads to positive moderation impact on association between FRQ and INVEFF. These results suggests that higher FRQ play important monitoring role for protecting investor’s funds and increases overall investment efficiencies. Supervisor:- Dr. Abdul Rashid