Product market competition and conditional conservatism

Product market competition and conditional conservatism Based on pooled cross-sectional analysis, we find a robust positive relation between product market competition and conditional accounting conservatism. We also find evidence of an inter-temporal increase in conditional conservatism following industry deregulation and increased antitrust case filings. Distinguishing further between two dimensions of competition, we find conditional conservatism is greater when there is a higher threat of new entrants as well as stiff existing competition. Moreover, we find these results largely hold for industry followers as opposed to industry leaders, suggesting that strategic considerations shape the extent to which product market competition affects conditional conservatism. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Product market competition and conditional conservatism

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Publisher
Springer US
Copyright
Copyright © 2014 by Springer Science+Business Media New York
Subject
Economics / Management Science; Accounting/Auditing; Finance/Investment/Banking; Public Finance & Economics
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1007/s11142-013-9267-2
Publisher site
See Article on Publisher Site

Abstract

Based on pooled cross-sectional analysis, we find a robust positive relation between product market competition and conditional accounting conservatism. We also find evidence of an inter-temporal increase in conditional conservatism following industry deregulation and increased antitrust case filings. Distinguishing further between two dimensions of competition, we find conditional conservatism is greater when there is a higher threat of new entrants as well as stiff existing competition. Moreover, we find these results largely hold for industry followers as opposed to industry leaders, suggesting that strategic considerations shape the extent to which product market competition affects conditional conservatism.

Journal

Review of Accounting StudiesSpringer Journals

Published: Jan 7, 2014

References

  • The limitations of industry concentration measures constructed with COMPUSTAT data: Implications for finance research
    Ali, A; Klasa, S; Yeung, PE
  • Corporate governance and the information environment: Evidence from state antitakeover laws
    Armstrong, CS; Balakrishnan, K; Cohen, D
  • The role of accruals in asymmetrically timely gain and loss recognition
    Ball, R; Shivakumar, L
  • The conservatism principle and the asymmetric timeliness of earnings
    Basu, S

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