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Product Market Competition, Information and Earnings Management

Journal of business finance & accounting, 2014-06, Vol.41 (5-6), p.572-599 [Peer Reviewed Journal]

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Title:
Product Market Competition, Information and Earnings Management
Author: Markarian, Garen ; Santalo´, Juan
Subjects: Accruals ; Bayesian-Cournot-Nash oligopoly ; Business economics ; Competition ; Determinants ; Earnings ; Earnings management ; Economic incentives ; Management science ; Manipulation ; Market value ; Studies
Is Part Of: Journal of business finance & accounting, 2014-06, Vol.41 (5-6), p.572-599
Description: 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.
Publisher: Oxford: Blackwell Publishing Ltd
Language: English
Identifier: ISSN: 0306-686X
EISSN: 1468-5957
DOI: 10.1111/jbfa.12064
Source: Alma/SFX Local Collection

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