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The impact of product market competition on earnings quality

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  • Peter Cheng
  • Paul Man
  • Cheong H. Yi

Abstract

type="main" xml:lang="en"> The objective of this paper is to examine the impact of product market competition on earnings quality. Based on a sample from the US manufacturing sector for the period 1996–2005, we find consistent evidence showing a positive relation between product market competition and earnings quality. Additional tests also confirm a positive relation between product market competition and the precision of public and private information held by investors and analysts. We also provide evidence that firms competing in concentrated and heterogeneous industries are associated with a number of earnings attributes and information quality not shared by those competing in concentrated but homogeneous industries. These findings are consistent with the intuition that firms enjoying a monopolistic advantage tend to avoid the attention of their competitors and politicians by creating a more opaque information environment.

Suggested Citation

  • Peter Cheng & Paul Man & Cheong H. Yi, 2013. "The impact of product market competition on earnings quality," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(1), pages 137-162, March.
    • Handle: RePEc:bla:acctfi:v:53:y:2013:i:1:p:137-162
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    File URL: http://hdl.handle.net/10.1111/j.1467-629X.2011.00457.x
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