Competition, Capital Market Feedback, and Earnings Management: Evidence from Economic Deregulation

Jongsub Lee, Xiaoding Liu
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引用次数: 7

Abstract

Using economic deregulation as a quasi-natural experiment for increasing product market competition, we find increases in earnings manipulation and accounting frauds following deregulation. This “dark-side” of product market competition is particularly evident for deregulated firms in high market-to-book industries, where we find evidence of short-termism in the capital market. We further find that firms in these industries, if actively manage earnings, tend to make more acquisitions and have higher survival rates. Overall, our results are largely consistent with Shleifer (2004), who predicts an important interplay between product market competition and capital market valuation feedback that could induce misbehaving incentives among firms in competitive industries.
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竞争、资本市场反馈与盈余管理:来自经济放松管制的证据
将经济放松管制作为增加产品市场竞争的准自然实验,我们发现放松管制后盈余操纵和会计欺诈增加。这种产品市场竞争的“黑暗面”在高市净率行业的放松管制公司中尤为明显,我们在资本市场中发现了短期主义的证据。我们进一步发现,这些行业的公司如果积极管理盈余,往往会进行更多的收购,并有更高的存活率。总体而言,我们的结果与Shleifer(2004)基本一致,他预测产品市场竞争和资本市场估值反馈之间存在重要的相互作用,这种相互作用可能导致竞争性行业中企业的不当行为激励。
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