Product Market Competition and Earnings Quality

Authored by: Liquan Xing , Hanwen Chen , Haiyan Zhou

The Routledge Companion to Accounting in China

Print publication date:  September  2018
Online publication date:  September  2018

Print ISBN: 9781138678538
eBook ISBN: 9781315558899
Adobe ISBN:

10.4324/9781315558899-7

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Abstract

In this chapter, we explore the relationship between product market competition and earnings quality in the emerging market. Using a sample of observations from the Chinese public companies for the period of 2007–2012, we find that firms confronted with more product market competition are associated with more earnings management. In addition, when a firm is ranked at a higher competitive position in the industry with stronger pricing power, it is more likely to commit real earnings management, and less likely to accrue earnings via accruals.

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