Product Market Competition, Information and Earnings Management

Garen Markarian () and Juan Santaló ()
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Garen Markarian: Instituto de Empresa
Juan Santaló: Instituto de Empresa
Authors registered in the RePEc Author Service: Juan Santalo

Working Papers Economia from Instituto de Empresa, Area of Economic Environment

Abstract: Abstract: We study the effect of product market competition on the incentives to engage in earnings manipulation and we find that they crucially depend on the level of visibility of firm real activity in the marketplace. If investors can perfectly observe real firm output and sales, then CEOs are forced to act in the marketplace in a consistent manner with the earnings they are reporting. We show in a simple model how this is too expensive in more competitive markets and therefore competition should reduce rather than increase earnings manipulation. On the contrary, if investors and analysts cannot observe firm real output in the marketplace we show how manipulating earnings might be particu

Pages: 30 pages
Date: 2010-05
New Economics Papers: this item is included in nep-bec and nep-com
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Journal Article: Product Market Competition, Information and Earnings Management (2014)
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