Product Market Competition and Managerial Disclosure of Earnings Forecasts: Evidence from Import Tariff Rate Reductions

Posted: 27 Jul 2016

See all articles by Ying Huang

Ying Huang

University of Texas at Dallas

Ross Jennings

University of Texas at Austin - Department of Accounting

Yong Yu

University of Texas at Austin

Date Written: July 7, 2016

Abstract

This study examines the effect of product market competition on managerial disclosure of earnings forecasts using large reductions in U.S. import tariff rates to identify an exogenous increase in competition for domestic firms in U.S. product markets. Our difference-in-difference estimations show that tariff reductions are associated with a significant decrease in management forecasts of annual earnings by U.S. domestic firms. Further, this decrease is more pronounced when the tariff rate reduction triggers a greater increase in imports and when the forecasts are likely to incur higher proprietary costs. Our findings are consistent with competition from existing rivals reducing voluntary disclosure through increased proprietary costs.

Keywords: competition; disclosure; proprietary cost; tariff rate reduction

JEL Classification: G14, M41

Suggested Citation

Huang, Ying and Jennings, Ross and Yu, Yong, Product Market Competition and Managerial Disclosure of Earnings Forecasts: Evidence from Import Tariff Rate Reductions (July 7, 2016). Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2814723

Ying Huang

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Ross Jennings

University of Texas at Austin - Department of Accounting ( email )

Austin, TX 78712
United States
512-471-5340 (Phone)
512-471-3904 (Fax)

Yong Yu (Contact Author)

University of Texas at Austin ( email )

1 University Station B6400
Austin, TX 78712
United States
(512)471-6714 (Phone)
(512)471-3904 (Fax)

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