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Product market competition and earnings management around open-market repurchase announcements

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  • Liao, Tsai-Ling
  • Lin, Wen-Chun

Abstract

This study examines how market competition influences the extent and types of earnings management activities around share repurchase announcements. We find that repurchasing firms operating in more competitive industries conduct significantly less downward accrual-based and real activity management than those in less competitive industries. Furthermore, we document that both before and after the passage of the Sarbanes–Oxley Act (SOX), the negative relation between market competition and real earnings management around repurchase announcements remains, while the negative relation between market competition and accrual-based earnings management is only pronounced pre-SOX, but not post-SOX.

Suggested Citation

  • Liao, Tsai-Ling & Lin, Wen-Chun, 2016. "Product market competition and earnings management around open-market repurchase announcements," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 187-203.
    • Handle: RePEc:eee:reveco:v:44:y:2016:i:c:p:187-203
    DOI: 10.1016/j.iref.2016.04.006
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    More about this item

    Keywords

    Accrual-based earnings management; Real earnings management; Product market competition; Sarbanes–Oxley Act; Share repurchases announcements;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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