Datta (2011) found that firms with lower market power possess an inferior ability to raise their product prices when costs surge and are thus unable to pass on such increases in cost to consumers.Hence, these firms had greater incentives to practice earnings management.
Datta (2011) found that firms with lower market power possess an inferior ability to raise their product prices when costs surge and are thus unable to pass on such increases in cost to consumers.Hence, these firms had greater incentives to practice earnings management.Based on empirical results, the authors found a significant negative correlation between market power and discretionary accruals and market concentration (or lower market competition) and discretionary accruals in both the Chinese or Taiwanese markets. This article is published under the Creative Commons Attribution (CC BY 4.0) licence.
Prior research indicated that firms with a lower level of corporate governance and stock trading regulation in undeveloped countries exhibited increased earnings management (Almadi and Lazic, 2016).
The authors asserted that earnings management poses a considerable problem for investors who rely on the accuracy and transparency of a firm’s financial information in deriving investment decisions.
Moradi (2015) found that managers preferred accrual-based activities to real activities because the former improves the firms’ future performance, thus securing managers’ bonuses.
Most notably, previous research has shown earnings management to be associated with product market pricing power (also known as “market power”) and market competition.
Our causal evidence suggests that managers use real earnings management to enhance short-term performance in response to analyst pressure, effects that are not uncovered when focusing solely on accrual-based methods.
This study aims to understand the impact of market power and competition on earnings management, particularly discretionary accruals, in the Chinese and Taiwanese tourism industries.In contrast, Taiwan became a democratic society after the lifting of martial laws in 1987.Taiwan developed itself into a capitalist economy and became one of the Four Asian Tigers.Based on listed travel companies, generalization of the research results to entire tourism industry is limited. The full terms of this licence may be seen at Financial reports are used to convey corporate information on firm performance.This study compares the travel companies’ practices of smoothing out earnings between China and Taiwan, thus helping managers and investors in making their financing, investment decisions. (2019), "Market power, competition and earnings management: accrual-based activities", Journal of Financial Economic Policy, Vol. However, corporate managers could choose reporting methods to reflect the financial figures to their own advantages.We study how securities analysts influence managers’ use of different types of earnings management.To isolate causality, we employ a quasi-experiment that exploits exogenous reductions in analyst following resulting from brokerage house mergers.China and Taiwan differ not only in their political and social systems but also in their economic systems.The research aims to provide managers and investors with stock selection strategy in the decision-making process.Building on this phenomenon, we observed that the tourism industries of China and Taiwan have both experienced significant growth in the past decade with the number of tourists traveling to and from these countries rising by 5 per cent or more per year.Therefore, the high potential revenue from travel and tourism expansion in China and Taiwan has created the expectation of a lucrative market for investors (Chen and Kim, 2010).