文摘
Product markets are becoming increasingly more competitive. Because of an increased number of firms in U.S. product market,globalization,and FTA (Free Trade Agreement),both product market competition from potential entrants and existing rivals is growing. This dissertation examines the effect of growing product market competition on financial reporting quality. The first dissertation paper examines product market competition from potential entrants and existing rivals on earnings quality. Theory suggests that firms in intense competition may engage in real earnings management or accrual based earnings management. However,the differential direction of the effect of each type of product market competition is obscure and the sparse empirical literature is mixed. The results indicate that product market competition decreases real earnings management and partially decreases accrual based earnings management. Collectively,product market competition provides a disciplinary effect on managerial operating decisions and financial reporting quality. The second dissertation paper investigates how the type of product market competition affects Classification Shifting Earnings management. This paper finds that firms in high product market competition have consistent core earnings levels and managers in high product market competition are less likely to use classification shifting earnings management through special items. Furthermore,firms in high product market competition have less unexpected core earnings and less usage of special items for classification shifting earnings management than firms in low product market competition. The third dissertation paper examines the impact of product market competition from existing rivals and potential entrants on corporate tax avoidance behavior. Also,the paper tests whether firms' industry competitive status affects corporate tax avoidance. Results finds that product market competition leads to more aggressive tax reporting behavior. Specifically,firms in high product market competition from existing rivals are more likely to engage in tax avoidance whereas firms in high product market competition from potential entrants less concern about avoiding taxes. In firm level product market competition analysis,industry following firms are more likely to engage in tax avoidance than larger and industry leading firms. Collectively,this study finds that it is actually smaller firms under competitive product market pressure that take advantage of the tax system.