Product Market Competition, Change of Board Structure and Earnings Management

Abstract

Abstract:

Based on Competition Theory and Corporate Governance Theory, this paper uses empirical data of A-share listed firms in China in the period 2007-2013 to test the change of board structure's current and delayed effect on the relationship between product market competition and earnings management. The results show:The predatory risk effect under the information view will induce earnings management of listed companies, and the degree of earnings management increases with the degree of the product market competition. However, when we introduce the moderator which calls the change of board structure, we find that the change of board structure can significantly lessen the positive correlation between product market competition and earnings management. This inhibition effect can exist continuously during a short time, which underlines the necessity and effectiveness of board governance. The research shows that the effective board governance, complete board structure and good environment of external market competition play an important role to improve the quality of the company's earnings report.

Key words: product market competition, board structure, earnings management, moderating effect

Yao Hong, Jia Wei, Hao Xiaoyu, Wang Lijie. Product Market Competition, Change of Board Structure and Earnings Management[J]. , 2018, 30(4): 194-205.

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