The impacts of product market competition on the quantity and quality of voluntary disclosures

2010 ◽  
Vol 15 (3) ◽  
pp. 663-711 ◽  
Author(s):  
Xi Li
Keyword(s):  
Market Competition ◽  
Product Market ◽  
Product Market Competition ◽  
Voluntary Disclosures

Modeling product market competition and reporting quality: the transitional economy of China

2017 ◽  
Vol 43 (2) ◽  
pp. 154-166 ◽  
Author(s):  
Amjad Iqbal ◽  
Zia-ur-Rehman Rao ◽  
Muhammad Zubair Tauni ◽  
Khalil Jebran
Keyword(s):  
Market Competition ◽  
Reporting Quality ◽  
Product Market ◽  
Transitional Economy ◽  
Product Market Competition ◽  
Absolute Level ◽  
Content Type ◽  
The Absolute

Purpose The purpose of this paper is to examine the role of product market competition in shaping a firm’s reporting quality (RQ). Design/methodology/approach This research uses an aggregate measure of a firm’s RQ, considering both the absolute level of discretionary accruals (DA) and the quality of accruals, using modified Jones model and Francis et al. (2005) accruals quality model, respectively. Whereas, the Herfindahl-Hirschman index and the Lerner index are used to measure product market competition. Further, this study considers the transitional economy of China and employs panel data estimation techniques for testing the hypothesized relationships. Findings This study finds that firms operating in more competitive industries are associated with higher RQ. This association still prevails when analysis is done using the component measures of RQ (i.e. the absolute level of DA and the quality of accruals). Overall, the empirical results provide evidence on the disciplining role of product market competition among Chinese firms. Practical implications Given the complex governance structures and specific kind of agency problems in Chinese corporations, this study suggests that product market competition may play an external disciplining role to improve the corporate information environment. Originality/value This research explores the role of product market competition for a firm’s RQ in Chinese-listed companies, while the prior studies on the same topic are mostly from the developed countries.

The nexus between product market competition and the quality of analysts’ forecasts: empirical evidence from Chinese-listed firms

2020 ◽  
Vol 14 (1) ◽  
pp. 15-30
Author(s):  
Amjad Iqbal ◽  
Khalil Jebran ◽  
Muhammad Umar
Keyword(s):  
Empirical Evidence ◽  
Market Competition ◽  
Positive Association ◽  
Product Market ◽  
State Ownership ◽  
Product Market Competition ◽  
Future Research ◽  
Manufacturing Companies ◽  
Content Type

Purpose This study aims to explore the relationship between product market competition (competition hereafter) and the quality of analysts’ forecasts. Design/methodology/approach This study uses industry-level (i.e. Herfindahl–Hirschman index), as well as firm-level (i.e. Lerner index) measures of competition and uses forecast accuracy and forecasts dispersion as proxies for analysts’ forecast quality. Further, this study considers a sample of Chinese-listed manufacturing companies for the period spanning 2005 to 2016 and uses various estimation techniques to empirically test the hypothesized relationship. Findings The results show that firms in highly competitive industries are characterized by greater accuracy and smaller dispersion in forecasts. Further, this positive association is more pronounced in SOEs as compared to NSOEs, and in industries characterized by intense competition. The sensitivity analysis further endorses the main results. Practical implications Presenting theoretical and empirical evidence, this study suggests that regulatory bodies should take steps to promote the competitive environment in China. This can help financial analysts in developing more accurate and reliable forecasts and ultimately can bring informational efficiency to the market. Finally, investors would be able to perform their business valuation process in a better way and make economic-useful decisions regarding their capital resource allocation. Originality/value The contribution of the current research is threefold: first, it adds to the limited literature available on this specific topic; second, this study examines the issue in China and further single out the influence of state-ownership and intensity of competition on the relation between competition and forecast properties; and third, this study provides theoretical arguments for the positive association between competition and forecasts quality while setting directions for future research on the topic and suggests the potential channels such as the reporting quality channel and the information disclosure channel that need to be explored further, to better understand the mechanism where competition influences the quality of analysts’ forecasts.

Product Market Competition’s Effect on Earnings Management When Audit Quality Is Endogenous: Theory and Evidence

2019 ◽  
Vol 15 (3) ◽  
Author(s):  
Andrew Samuel ◽  
Jeremy Schwartz
Keyword(s):  
Earnings Management ◽  
Audit Quality ◽  
Structural Parameters ◽  
Market Competition ◽  
Product Market ◽  
Product Market Competition ◽  
Theoretic Model ◽  
Industry Competition ◽  
Game Theoretic

Abstract A long standing question is whether product market competition disciplines a firm’s incentive to engage in earnings management. This paper argues that this question cannot be investigated adequately without accounting for the quality of firms’ auditors, because auditors affect the probability of discovering earnings management. Since firms choose their auditor, a non-compliant firm can alter its own probability of being detected. Consequently, a firm’s decision to manage earnings is a function of its auditor’s quality, which is itself endogenously chosen by the firm. To study this issue we develop a game-theoretic model that captures the potential inter-relationship between industry competition, the firms’ choice of audit quality, and compliance with accounting regulations (or the degree of earnings manipulation). We show that the link between financial compliance and product market competition is affected by the endogenously chosen audit quality. We estimate this model’s structural parameters and find that greater competition reduces both compliance and the demand for high quality audits.

scholarly journals Product-market competition, internal control quality and audit opinions. Evidence from Chinese listed firms

2020 ◽  
Vol 23 (1) ◽  
pp. 102-112
Author(s):  
Ling Zhang ◽  
Wen Chen ◽  
WUN HONG SU
Keyword(s):  
Internal Control ◽  
Market Competition ◽  
Product Market ◽  
Product Market Competition ◽  
Certified Public Accountant ◽  
Listed Firms ◽  
Control Quality ◽  
Audit Opinions ◽  
Public Accountant

Sobre la base de los datos de las empresas que cotizan en los mercados bursátiles A de Shangai y Shenzhen entre 2007 y 2015, este estudio examina las relaciones entre la calidad del control interno, la competencia en el mercado de productos y las opiniones de auditoría. Los resultados empíricos revelan que (1) cuanto mejor sea la calidad del control interno de las empresas que cotizan en bolsa, más probable es que un contador público certificado emita una opinión sin modificaciones; (2) la competencia en el mercado de productos se asocia positivamente con las opiniones sin modificaciones; (3) la competencia en el mercado de productos debilita la relación positiva entre la calidad del control interno de las empresas que cotizan en bolsa y la probabilidad de que un contador público certificado emita una opinión sin modificaciones; y (4) el impacto significativo de la competencia en el mercado de productos sobre la relación entre el control interno de la calidad y las opiniones sin modificaciones sólo existe en las industrias no monopolísticas. Based on data on listed firms in the Shanghai and Shenzhen A-share stock markets from 2007 to 2015, this study examines the relations among the quality of internal control, product-market competition and audit opinions. The empirical results reveal that (1) the better the quality of the internal control of listed firms is, the more likely a certified public accountant will be to issue a unmodified opinion; (2) the product-market competition is positively associated with unmodified opinions; (3) the product-market competition weakens the positive relation between the quality of the internal control of listed firms and the likelihood that a unmodified opinion will be issued by a certified public accountant; and (4) the significant impact of product-market competition on the relation between internal control quality and unmodified opinions exists only in non-monopoly industries.

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