Competition and Financial Accounting Misreporting

52 Pages Posted: 15 Sep 2011 Last revised: 2 Oct 2013

See all articles by Karthik Balakrishnan

Karthik Balakrishnan

Rice University - Jesse H. Jones Graduate School of Business

Daniel A. Cohen

Texas A&M University College Station

Multiple version iconThere are 2 versions of this paper

Date Written: September 30, 2013

Abstract

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.

Keywords: Product Market Competition, Disclosure, Financial Reporting Quality, Earnings Restatements, Tariffs

JEL Classification: D4, G34, L1, M40, M41

Suggested Citation

Balakrishnan, Karthik and Cohen, Daniel A., Competition and Financial Accounting Misreporting (September 30, 2013). Available at SSRN: https://ssrn.com/abstract=1927427 or http://dx.doi.org/10.2139/ssrn.1927427

Karthik Balakrishnan

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

Daniel A. Cohen (Contact Author)

Texas A&M University College Station

Department of Accounting
College Station, TX 77843
United States

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