The impact of product market competition on earnings quality

Document Type

Journal Article

Publication Date

2013

Keywords

Earnings quality, Industry concentration, Product market competition

DOI

10.1111/j.1467-629X.2011.00457.x

Abstract

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.

Source Publication

Accounting & Finance

Volume Number

53

Issue Number

1

First Page

137

Last Page

162

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