Price-Fixing Agreements and Financial Reporting Opacity

47 Pages Posted: 28 Mar 2022

See all articles by Ni Nyoman Ayu Diantini

Ni Nyoman Ayu Diantini

Udayana University; The University of Western Australia

Chloe CY Ho

The University of Western Australia

Rui Zhong

The University of Western Australia - UWA Business School

Date Written: February 25, 2022

Abstract

This study investigates the effects of price-fixing agreement engagement on corporate financial reporting opacity. Using a sample of U.S. cartel firms with price-fixing agreements from 1985 to 2016, we document a significant decline of financial reporting opacity when a firm engages into a price-fixing agreement. This negative relationship is robust to a battery of tests after addressing possible endogeneity concerns. Further empirical analysis shows that the negative relationship between price-fixing agreement engagement and financial reporting opacity is strengthened by product market competition, external monitoring, but is alleviated by corporate financial distress. Our findings support that managers reduce financial reporting opacity to facilitate information communication among participants via public channel and prolong the duration of price-fixing agreements, and shed light on the dark side of financial information transparency on consumer welfare in product markets.

Keywords: Price-fixing agreement, Cartel, Financial reporting opacity, Product market competition

JEL Classification: D22, D43, L15, L41, L44, M41

Suggested Citation

Diantini, Ni Nyoman Ayu and Ho, Chloe CY and Zhong, Rui, Price-Fixing Agreements and Financial Reporting Opacity (February 25, 2022). Available at SSRN: https://ssrn.com/abstract=4043275 or http://dx.doi.org/10.2139/ssrn.4043275

Ni Nyoman Ayu Diantini

Udayana University ( email )

Bukit Jimbaran Campus
Jimbaran
Denpasar, Bali 80000
Indonesia

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia

Chloe CY Ho

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia

Rui Zhong (Contact Author)

The University of Western Australia - UWA Business School ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia

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