Product Differentiation, Benchmarking, and Corporate Fraud

52 Pages Posted: 16 Nov 2017 Last revised: 10 Nov 2018

See all articles by Audra L. Boone

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: July 16, 2018

Abstract

We find that firms with lower product market differentiation exhibit significantly lower rates of fraud. This relationship is more pronounced for complex firms and is robust to controlling for various measures of competition, predictors of fraud, and industry heterogeneity. To help establish causality, we show this relationship holds when we exploit changes in product differentiation stemming from rivals’ IPO and acquisition activity. Finally, we find that IPOs (and acquisitions) of rivals facilitate the detection of fraud for firms with ex ante greater product differentiation. Overall, our findings suggest that lower differentiation disciplines firms by facilitating fraud detection through a benchmarking channel.

Keywords: corporate fraud, product markets, benchmarking, competition

JEL Classification: G30

Suggested Citation

Boone, Audra and Grieser, William and Li, Qingqiu and Venkat, Parth, Product Differentiation, Benchmarking, and Corporate Fraud (July 16, 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
87
rank
272,356
Abstract Views
410
PlumX