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 filing...

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Bibliographic Details
Published in:Review of accounting studies 2014-12, Vol.19 (4), p.1309-1345
Main Authors: Dhaliwal, Dan, Huang, Shawn, Khurana, Inder K., Pereira, Raynolde
Format: Article
Language:English
Subjects:
Accounting procedures
Accounting/Auditing
Business and Management
Competition
Competitive advantage
Conservatism
Corporate Finance
Costs
Disclosure
Economic models
Economic theory
Enforcement
Hypotheses
Incentives
Loss recognition
Market structure
Monopolies
Public Finance
Stockholders
Studies
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Summary: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.
ISSN:1380-6653
1573-7136
DOI:10.1007/s11142-013-9267-2