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Review of Accounting Studies

Erschienen in:

01.09.2010

Discussion of “The impact of product market competition on the quantity and quality of voluntary disclosures”

verfasst von: Christo Karuna

Erschienen in: Review of Accounting Studies | Ausgabe 3/2010

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Abstract

Li (2010, this issue) examines how product market competition affects voluntary disclosure by firms. Using several competition proxies, she finds that both the competitive threat from potential entrants into an industry and from existing rivals affect the quantity and accuracy of voluntary profit and investment forecasts by firms in that industry. However, the study’s findings are inconclusive mainly because each competition proxy used can reflect both types of competitive threat. The focus of my discussion is to provide some comments and suggestions for future researchers to consider in examining how the nature of product market competition affects voluntary firm disclosure.

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For this reason, it is common for researchers to assign a zero value for a missing value for variables such as research and development expenditure.

Obviously, if there is only one industrial segment in the firm, then the firm-level R&D expenditure or capital expenditure is the same as that for the segment.

Statistical significance of the correlations is not reported in the current study. Hence, my discussion is based on the signs of the correlations.

Surprisingly, the correlation between IND-ROA and IND-CON4 is positive in the current study.

Since market size reflects market demand, greater market size is more likely to encourage entry than to be a barrier to entry as the study assumes.

The fact that market size loads onto the two factors suggests that these factors could be related to each other.

Oblique rotation allows for this correlation between factors.

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Clinch, G., & Verrecchia, R. (1997). Competitive disadvantage and discretionary disclosure in industries. Australian Journal of Management, 22, 125–137.CrossRef

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Harris, M. (1998). The association between competition and managers’ business segment reporting decisions. Journal of Accounting Research, 36, 111–128.CrossRef

Hughes, J., & Williams, M. (2008). Commitments and disclosure in oligopolies. The Accounting Review, 83(1), 111.CrossRef

Karuna, C. (2007). Industry product market competition and managerial incentives. Journal of Accounting & Economics, 43, 275–297.CrossRef

Kedia, S. (2006). Estimating product market competition: Methodology and application. Journal of Banking & Finance, 30, 875–894.CrossRef

Li, X. (2010). The impacts of product market competition on the quantity and quality of voluntary disclosures. Review of Accounting Studies. doi:10.1007/s11142-010-9129-0.

Nevo, A. (2001). Measuring market power in the ready-to-eat cereal industry. Econometrica, 69(2), 307–342.CrossRef

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Titel: Discussion of “The impact of product market competition on the quantity and quality of voluntary disclosures”
verfasst von: Christo Karuna
Publikationsdatum: 01.09.2010
Verlag: Springer US
Erschienen in: Review of Accounting Studies / Ausgabe 3/2010
Print ISSN: 1380-6653
Elektronische ISSN: 1573-7136
DOI: https://doi.org/10.1007/s11142-010-9135-2

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