This paper is to review the relationship between financial reporting quality and investment efficiency in Tehran stock exchange companies. Recent papers have suggested that financial reporting can have important economic implications such as improving investment efficiency. However, despite the existence of a solid theoretical support for such a relationship, there is little empirical evidence supporting these claims especially in Iran. This paper shows that, there is a positive relationship between the financial reporting quality and investment efficiency and better quality of financial reporting improves investment efficiency. Also, this paper indicates that proxies for financial reporting quality are negatively associated with both firm underinvestment and overinvestment. So, it is suggested that financial reporting quality can improve investment efficiency by declining overinvestment and underinvestment.