The impact of product market competition on earnings quality

The objective of this dissertation is to examine the impact of product market competition on earnings quality. Based on a sample from the US manufacturing sector for the period 1996-2005, I find consistent evidence showing a negative relation between industry concentration and earnings quality. Addition test also confirms a negative relation between industry concentration and the precision of public and private information of analysts. These findings are consistent with the intuition that firms in concentrated industries tend to protect their competitive advantage and avoid political attention by creating a more opaque information environment. On the relation between industry homogeneity and earnings quality, I find mixed empirical evidence which leaves the role of competition in mitigating agency costs inconclusive. I also find limited empirical support linking competitive interaction to earnings quality. However, there is consistent evidence suggesting that industry homogeneity and competitive strategy help to moderate the negative impact of industry concentration on earnings quality.