Effect of Product Market Competition on Earnings Quality, Using Factor Analysis

This study investigates the effects of product market competition on earnings quality in 131 companies listed in the Tehran stock exchange in the context of 17 industries during 1385-1391. First, in order to provide a better assessment of the market competition, 8 common indicators were used. Then,...

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Autores principales:	Seyed Ali Vaez, Mohammad Hossein Ghalambor, Nasrin Ghanavati
Formato:	article
Lenguaje:	FA
Publicado:	Shahid Bahonar University of Kerman 2015
Materias:	earnings quality product market competition potential competition existing competition factor analysis Accounting. Bookkeeping HF5601-5689
Acceso en línea:	https://doaj.org/article/7603b2b318cc4f4da3cdc021621b3353
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spelling	oai:doaj.org-article:7603b2b318cc4f4da3cdc021621b33532021-11-04T19:47:54ZEffect of Product Market Competition on Earnings Quality, Using Factor Analysis2008-89142476-292X10.22103/jak.2015.990https://doaj.org/article/7603b2b318cc4f4da3cdc021621b33532015-09-01T00:00:00Zhttps://jak.uk.ac.ir/article_990_bb7c3216da5159932b1854f54d1ad106.pdfhttps://doaj.org/toc/2008-8914https://doaj.org/toc/2476-292XThis study investigates the effects of product market competition on earnings quality in 131 companies listed in the Tehran stock exchange in the context of 17 industries during 1385-1391. First, in order to provide a better assessment of the market competition, 8 common indicators were used. Then, using the factor analysis technique, these indicators were summarized in the three factors of potential competition (from entry thread of new competitors to the market), existing competition (from existing rivals) and industry profitability. Using panel and pooled data regressions, the research hypotheses were tested. Results indicated that there is not a significant relationship between existing competition and earnings quality, but, there is a significant and positive relationship between potential competition and earnings quality. In other words, when the entry thread of new competitors to market increases, the existing firms in the market are forced to report earnings at high quality by reduction in earnings management, including manipulation of accruals and real activities. This increases the predictability of earnings. However, the reduction in earnings management incentives does not mean absence of earnings manipulation, rather the least earnings manipulation by firms in the industries continues to create more earnings smoothness for eliminating earnings volatility that improves earnings information content about future cash flows.Seyed Ali VaezMohammad Hossein GhalamborNasrin GhanavatiShahid Bahonar University of Kermanarticleearnings qualityproduct market competitionpotential competitionexisting competitionfactor analysisAccounting. BookkeepingHF5601-5689FAمجله دانش حسابداری, Vol 6, Iss 21, Pp 133-154 (2015)
institution	DOAJ
collection	DOAJ
language	FA
topic	earnings quality product market competition potential competition existing competition factor analysis Accounting. Bookkeeping HF5601-5689
spellingShingle	earnings quality product market competition potential competition existing competition factor analysis Accounting. Bookkeeping HF5601-5689 Seyed Ali Vaez Mohammad Hossein Ghalambor Nasrin Ghanavati Effect of Product Market Competition on Earnings Quality, Using Factor Analysis
description	This study investigates the effects of product market competition on earnings quality in 131 companies listed in the Tehran stock exchange in the context of 17 industries during 1385-1391. First, in order to provide a better assessment of the market competition, 8 common indicators were used. Then, using the factor analysis technique, these indicators were summarized in the three factors of potential competition (from entry thread of new competitors to the market), existing competition (from existing rivals) and industry profitability. Using panel and pooled data regressions, the research hypotheses were tested. Results indicated that there is not a significant relationship between existing competition and earnings quality, but, there is a significant and positive relationship between potential competition and earnings quality. In other words, when the entry thread of new competitors to market increases, the existing firms in the market are forced to report earnings at high quality by reduction in earnings management, including manipulation of accruals and real activities. This increases the predictability of earnings. However, the reduction in earnings management incentives does not mean absence of earnings manipulation, rather the least earnings manipulation by firms in the industries continues to create more earnings smoothness for eliminating earnings volatility that improves earnings information content about future cash flows.
format	article
author	Seyed Ali Vaez Mohammad Hossein Ghalambor Nasrin Ghanavati
author_facet	Seyed Ali Vaez Mohammad Hossein Ghalambor Nasrin Ghanavati
author_sort	Seyed Ali Vaez
title	Effect of Product Market Competition on Earnings Quality, Using Factor Analysis
title_short	Effect of Product Market Competition on Earnings Quality, Using Factor Analysis
title_full	Effect of Product Market Competition on Earnings Quality, Using Factor Analysis
title_fullStr	Effect of Product Market Competition on Earnings Quality, Using Factor Analysis
title_full_unstemmed	Effect of Product Market Competition on Earnings Quality, Using Factor Analysis
title_sort	effect of product market competition on earnings quality, using factor analysis
publisher	Shahid Bahonar University of Kerman
publishDate	2015
url	https://doaj.org/article/7603b2b318cc4f4da3cdc021621b3353
work_keys_str_mv	AT seyedalivaez effectofproductmarketcompetitiononearningsqualityusingfactoranalysis AT mohammadhosseinghalambor effectofproductmarketcompetitiononearningsqualityusingfactoranalysis AT nasringhanavati effectofproductmarketcompetitiononearningsqualityusingfactoranalysis
_version_	1718444598831874048

Effect of Product Market Competition on Earnings Quality, Using Factor Analysis

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