Competition and Financial Accounting Misreporting
London Business School
Daniel A. Cohen
University of Texas at Dallas - Naveen Jindal School of Management
September 30, 2013
We show that, on average, product market competition acts as a disciplining force constraining managers from misreporting accounting information. Further, in a quasi-natural experiment that uses shifts in import tariffs to identify intensification of competition, difference-in-difference estimations support the disciplining effect of competition on misreporting. Our findings are robust across alternate measures of misreporting including restatements and accounting irregularities as well as to measures of product market competition including those based on the U.S. Census data.
Number of Pages in PDF File: 52
Keywords: Product Market Competition, Disclosure, Financial Reporting Quality, Earnings Restatements, Tariffs
JEL Classification: D4, G34, L1, M40, M41
Date posted: September 15, 2011 ; Last revised: October 2, 2013
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