EFFECT OF PRODUCT MARKET COMPETITION ON EARNINGS QUALITY, USING FACTOR ANALYSIS

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VAEZ SEYYED ALI; GHALAMBAR MOHAMMADHOSSEIN; GHANAVATI NASRIN

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Journal: JOURNAL OF ACCOUNTING KNOWLEDGE Year:2015 | Volume:6 | Issue:21 Page(s): 129-149

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Title

EFFECT OF PRODUCT MARKET COMPETITION ON EARNINGS QUALITY, USING FACTOR ANALYSIS

Author(s)

VAEZ SEYYED ALI | GHALAMBAR MOHAMMADHOSSEIN | GHANAVATI NASRIN | Issue Writer Certificate

Keywords

EARNINGS QUALITYQ1

PRODUCT MARKET COMPETITIONQ2

POTENTIAL COMPETITIONQ2

EXISTING COMPETITIONQ2

FACTOR ANALYSISQ2

Abstract

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.

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APA: Copy

VAEZ, SEYYED ALI, GHALAMBAR, MOHAMMADHOSSEIN, & GHANAVATI, NASRIN. (2015). EFFECT OF PRODUCT MARKET COMPETITION ON EARNINGS QUALITY, USING FACTOR ANALYSIS. JOURNAL OF ACCOUNTING KNOWLEDGE, 6(21), 129-149. SID. https://sid.ir/paper/163316/en

Vancouver: Copy

VAEZ SEYYED ALI, GHALAMBAR MOHAMMADHOSSEIN, GHANAVATI NASRIN. EFFECT OF PRODUCT MARKET COMPETITION ON EARNINGS QUALITY, USING FACTOR ANALYSIS. JOURNAL OF ACCOUNTING KNOWLEDGE[Internet]. 2015;6(21):129-149. Available from: https://sid.ir/paper/163316/en

IEEE: Copy

SEYYED ALI VAEZ, MOHAMMADHOSSEIN GHALAMBAR, and NASRIN GHANAVATI, “EFFECT OF PRODUCT MARKET COMPETITION ON EARNINGS QUALITY, USING FACTOR ANALYSIS,” JOURNAL OF ACCOUNTING KNOWLEDGE, vol. 6, no. 21, pp. 129–149, 2015, [Online]. Available: https://sid.ir/paper/163316/en

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