Product Differentiation, Benchmarking, and Corporate Fraud

50 Pages Posted: 16 Nov 2017 Last revised: 26 Apr 2018

Audra L. Boone

Texas Christian University - M.J. Neeley School of Business

William Grieser

Texas Christian University

Rachel Li

Michigan State University

Parth Venkat

Securities and Exchange Commission (SEC)

Date Written: April 17, 2018

Abstract

We find that firms with less product market differentiation exhibit significantly lower rates of fraudulent activity. This relationship is more pronounced for complex firms and is robust to controlling for various measures of competition and industry heterogeneity. Exploiting IPOs by product-market rivals as a shock to a firm’s information environment, we find that more publicly available information from comparable firms facilitates the detection of fraud. Moreover, this effect is stronger for firms with ex ante less similar public rivals. These findings suggest that greater product market overlap with rivals disciplines firms by providing benchmarks for auditors, regulators, and investors.

Keywords: corporate fraud, product markets, benchmarking, competition

JEL Classification: G30

Suggested Citation

Boone, Audra L. and Grieser, William and Li, Rachel and Venkat, Parth, Product Differentiation, Benchmarking, and Corporate Fraud (April 17, 2018). Available at SSRN: https://ssrn.com/abstract=3070375 or http://dx.doi.org/10.2139/ssrn.3070375

Audra Boone

Texas Christian University - M.J. Neeley School of Business ( email )

Fort Worth, TX 76129
United States

William Grieser

Texas Christian University ( email )

Fort Worth, TX 76129
United States

Qingqiu Li

Michigan State University ( email )

Eli Broad School of Business
East Lansing, MI 48824-1122
United States

Parth Venkat (Contact Author)

Securities and Exchange Commission (SEC) ( email )

450 Fifth Street, NW
Washington, DC 20549-1105
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
51
rank
352,412
Abstract Views
211
PlumX