Product Market Competition and Conditional Conservatism

54 Pages Posted: 20 Aug 2013 Last revised: 18 Mar 2014

See all articles by Dan S. Dhaliwal

Dan S. Dhaliwal

University of Arizona - Department of Accounting (deceased)

Shawn X. Huang

Arizona State University (ASU) - School of Accountancy

Inder K. Khurana

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business

Raynolde Pereira

University of Missouri at Columbia - School of Accountancy

Date Written: July 28, 2013

Abstract

Based on pooled cross-sectional analysis, we find a robust positive relation between product market competition and conditional accounting conservatism. We also find evidence of an inter-temporal increase in conditional conservatism following industry deregulation and increased antitrust case filings. Distinguishing further between two dimensions of competition, we find conditional conservatism is greater when there is a higher threat of new entrants as well as stiff existing competition. Moreover, we find these results largely hold for industry followers as opposed to industry leaders, suggesting that strategic considerations shape the extent to which product market competition affects conditional conservatism.

Keywords: Market Structure, Firm Strategy, Monopoly Rents, Political Costs

JEL Classification: D4, L1, M41

Suggested Citation

Dhaliwal, Dan S. and Huang, Shawn X. and Khurana, Inder and Pereira, Raynolde, Product Market Competition and Conditional Conservatism (July 28, 2013). Review of Accounting Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2312592 or http://dx.doi.org/10.2139/ssrn.2312592

Dan S. Dhaliwal

University of Arizona - Department of Accounting (deceased)

Shawn X. Huang (Contact Author)

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

Inder Khurana

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business ( email )

331 Cornell Hall
Columbia, MO 65211
United States
573-882-3474 (Phone)
573-882-2437 (Fax)

Raynolde Pereira

University of Missouri at Columbia - School of Accountancy ( email )

337 Cornell Hall
Columbia, MO 65211
United States
573-882-6253 (Phone)

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