Implications of biased reporting: conservative and liberal accounting policies in oligopolies

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• 作者：Henry L. Friedman ; John S. Hughes ; Richard Saouma
• 关键词：Conservatism ; Oligopoly ; Competition ; Information sharing ; Biased reporting
• 刊名：Review of Accounting Studies
• 出版年：2016
• 出版时间：March 2016
• 年：2016
• 卷：21
• 期：1
• 页码：251-279
• 全文大小：601 KB
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• 作者单位：Henry L. Friedman (1)
  John S. Hughes (1)
  Richard Saouma (2)
  
  1. Anderson School of Management, University of California Los Angeles, 110 Westwood Plaza, D402, Los Angeles, CA, 90095, USA
  2. David Eccles School of Business, University of Utah, 1655 E. Campus Center Dr. 7128, Salt Lake City, UT, 84112, USA
  
• 刊物主题：Accounting/Auditing; Finance/Investment/Banking; Public Finance & Economics;
• 出版者：Springer US
• ISSN：1573-7136

文摘

We examine the effects of biased (conservative or liberal) reporting on product market competition. Cournot duopolists observe either firm-specific or industry-wide shocks and provide noisy reports subject to an exogenous mandated bias attributed to public policy. Given neutral prior beliefs, either a conservative bias or a liberal bias enhances overall reporting-system informativeness as measured by the reduction of uncertainty. Consistent with previously established effects in the information sharing literature regarding increases in informativeness, we show that expected industry profits and expected consumer surplus may gain or lose from bias, depending on whether the shocks are firm-specific or industry-wide and the degree of product competition. Expected social welfare, however, always increases in bias, irrespective of the source of uncertainty and product substitutability or complementarity. We next consider a setting where firms self-select whether to bias reports and characterize regions of potential conflict with a public policy that maximizes expected social welfare. Further results on the differential effects of conservative or liberal bias follow from relaxing the assumption of neutral prior beliefs.