Competition and Financial Accounting Misreporting
51 Pages Posted: 10 Jun 2014 Last revised: 13 Sep 2014
Date Written: September 8, 2014
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, Fraud, Earnings restatements, Tarriffs
JEL Classification: D4, G34, L1, M40, M41
Suggested Citation: Suggested Citation