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Product Market Competition, Legal Institutions, and Accounting Conservatism

Haw, I.-M.G., Ho, S.S.M., Li, Y. and Zhang, F.F. (2015) Product Market Competition, Legal Institutions, and Accounting Conservatism. Journal of International Accounting Research, 14 (2). pp. 1-39.

Link to Published Version: http://dx.doi.org/10.2308/jiar-51051
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Abstract

In this study, we examine product market competition's role in shaping accounting conservatism in an international setting. Using a large dataset from 38 countries, we find evidence that product market competition is positively associated with accounting conservatism in countries with strong legal institutions, but not in countries with weak legal institutions. Moreover, the positive association is significantly more pronounced in countries with high-quality financial reporting environments comprising a higher earnings quality, more frequent and greater disclosure practices, and the more stringent enforcement of insider trading regulations. Our empirical findings suggest that product market competition and strong legal institutions jointly drive accounting conservatism.

Publication Type: Journal Article
Murdoch Affiliation: School of Management and Governance
Publisher: American Accounting Association
Copyright: American Accounting Association
URI: http://researchrepository.murdoch.edu.au/id/eprint/29438
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