Product Market Competition, Information and Earnings Management

28 Pages Posted: 26 Jul 2014

See all articles by Garen Markarian

Garen Markarian

HEC - University of Lausanne

Juan Santaló

Fundación Instituto de Empresa, S.L. - IE Business School

Date Written: June/July 2014

Abstract

We study theoretically the effect of product market competition on the incentives to engage in earnings manipulation, and we show how manipulating earnings is particularly rewarding in more competitive markets since the boost in market value of reporting good earnings is especially important. Using a panel dataset of about 70,000 observations spanning the period 1989–2011, we document that the competitive environment is an important determinant of Jones type discretionary accruals and it also affects real earnings management. In additional analysis, we find that the effect of competition on earnings manipulation is particularly important for companies that seem to be underperforming their competitors and that the competition‐earnings management linkage is moderated by the degree of information visibility at the industry level.

Keywords: earnings management, competition, Bayesian‐Cournot‐Nash oligopoly

Suggested Citation

Markarian, Garen and Santalo, Juan, Product Market Competition, Information and Earnings Management (June/July 2014). Journal of Business Finance & Accounting, Vol. 41, Issue 5-6, pp. 572-599, 2014, Available at SSRN: https://ssrn.com/abstract=2472214 or http://dx.doi.org/10.1111/jbfa.12064

Garen Markarian (Contact Author)

HEC - University of Lausanne ( email )

UNIL Dorigny
Lausanne, Lausanne 1015
Switzerland

Juan Santalo

Fundación Instituto de Empresa, S.L. - IE Business School ( email )

Calle Maria de Molina 12, Bajo
Madrid
Spain

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
968
PlumX Metrics