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Competition and Financial Accounting Misreporting

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

Karthik Balakrishnan

London Business School

Daniel A. Cohen

University of Texas at Dallas - Naveen Jindal School of Management

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

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom

Daniel A. Cohen (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States
972-883-4772 (Phone)
972-883-6811 (Fax)

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