Abstract

http://ssrn.com/abstract=1908338
 
 

Citations (3)



 


 



A Measure of Competition Based on 10-K Filings


Feng Li


University of Michigan, Stephen M. Ross School of Business

Russell J. Lundholm


University of British Columbia - Sauder School of Business

Michael Minnis


University of Chicago - Booth School of Business

October 23, 2012

Chicago Booth Research Paper No. 11-30
Journal of Accounting Research, Forthcoming

Abstract:     
In this paper we develop a measure of competition based on management’s disclosures in their 10-K filing and find that firms’ rates of diminishing marginal returns on new and existing investment vary significantly with our measure. We show that these firm-level disclosures are related to existing industry-level measures of disclosure (e.g. Herfindahl index), but capture something distinctly new. In particular, we show that the measure is associated with the rates of diminishing marginal returns within industry, something that traditional industry-level measures of competition cannot do by construction. We find limited and indirect evidence that management strategically makes misleading statements about their competitive landscape. However, on the whole, we find that the disclosures about competition in the 10-K are useful, and relate to firm performance in ways that suggest they meaningfully measure firm-level competition.

Number of Pages in PDF File: 55

Keywords: competition, disclosure, earnings persistence, earnings mean reversion, diminishing marginal returns

JEL Classification: D40, G12, M41

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Date posted: August 15, 2011 ; Last revised: October 24, 2012

Suggested Citation

Li, Feng and Lundholm, Russell J. and Minnis, Michael, A Measure of Competition Based on 10-K Filings (October 23, 2012). Chicago Booth Research Paper No. 11-30. Available at SSRN: http://ssrn.com/abstract=1908338 or http://dx.doi.org/10.2139/ssrn.1908338

Contact Information

Feng Li
University of Michigan, Stephen M. Ross School of Business ( email )
701 Tappan Street
Ann Arbor, MI MI 48109
United States
Russell J. Lundholm
University of British Columbia - Sauder School of Business ( email )
2053 Main Hall
Vancouver, British Columbia V6T 1Z2
Canada
Michael Minnis (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 South Woodlawn Avenue
Chicago, IL 60637
United States
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