Competition and Financial Accounting Misreporting
52 Pages Posted: 15 Sep 2011 Last revised: 2 Oct 2013
Date Written: 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.
Keywords: Product Market Competition, Disclosure, Financial Reporting Quality, Earnings Restatements, Tariffs
JEL Classification: D4, G34, L1, M40, M41
Suggested Citation: Suggested Citation