Does exposure to product market competition influence insider trading profitability?

Rahman, Dewan; Kabir, Muhammad; Oliver, Barry

doi:10.1016/j.jcorpfin.2020.101792

Cited by 31 publications

(15 citation statements)

References 72 publications

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“…The mean value of our measure of managers' perception of product market competition, MPCOMP is 0.826. These summary statistics are comparable with those reported in previous studies that have used these data (Bowen et al, 1995;Barton and Simko, 2002;Dechow and Dichev, 2002;Skinner and Sloan, 2002;Cheng and Warfield, 2005;Roychowdhury, 2006;Kim and Sohn, 2013;Li et al, 2013;Filip and Raffournier, 2014;Ali and Zhang, 2015;Cheng et al, 2016;Shi et al, 2018;Fan et al, 2019;Lara et al, 2020;Rahman et al, 2021;Andreou et al, 2020Andreou et al, , 2021Harris, 2018Harris, , 2023.…”

Section: Descriptive Statistics and Correlationssupporting

confidence: 88%

Managers’ perception of product market competition and earnings management: a textual analysis of firms’ 10-K reports

Harris

2024

JAL

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PurposeIn this study, the author examines the effect of managers’ perception of product market competition on accruals and real earnings management.Design/methodology/approachThe author develops a new text-based measure of the emphasis managers place on product market competition by conducting a textual analysis of firms’ 10-K filings. Using this measure, the author conducts a battery of econometric analyses and robustness checks to investigate the impact of this measure of product market competition on measures of accruals and real earnings management.FindingsThis study finds robust evidence that when management perceives more competitive threats, they are more likely to engage in accruals-based earnings manipulation but are less likely to engage in real earnings management activity. The author argues that these findings are due to managers’ career concerns enticing them to manage earnings via accrual when competition is high, but that greater product market competition discourages real earning management activity as it can diminish firms’ competitiveness.Practical implicationsThe findings of this paper have important policy and practical implications since it signals that managers’ perceptions of product market competition is able to affect accounting choices, information environments and economic outcomes in firms.Originality/valueThis study develops a new text-based measure of managers’ perception of product market competition with the aid of GPT-4. The author then using this measure provides firm-level evidence on how this relates to earnings management.

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Section: Descriptive Statistics and Correlationssupporting

confidence: 88%

Managers’ perception of product market competition and earnings management: a textual analysis of firms’ 10-K reports

Harris

2024

JAL

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“…For robustness, we conduct a placebo test by randomly assigning awards to directors that did not win an award in that year as in Rahman et al (2021). We keep the same number of awardees for each year to avoid unobserved year‐related bias.…”

Section: Resultsmentioning

confidence: 99%

“…If our results are driven by an actual improvement in director effectiveness following an award, then we should find insignificant changes in CEO compensation for randomly assigned 'awardee' directors. As the results in Table 11 indicate, the significance of the coefficients for the placebo 11 Rahman et al (2021), in their test of tariff rate changes as a shock to product market competition, also assign different tariff rate shock years to those firms that receive an actual tariff rate shock. In our context, this random assignment is challenging as it can select award years that are shortly after the actual award or when the awardee serves as a director on a completely different set of boards.…”

Section: Robustness Testsmentioning

confidence: 99%

Director awards and board effectiveness

Baran

Cheng

2023

Accounting & Finance

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We explore the impact of prestigious director awards on effectiveness in setting CEO compensation. Consistent with the positive announcement effect for firms with awardees, CEO compensation aligns more closely with shareholder interest and includes enhanced risk‐taking incentives for boards with awardees. The effect is most pronounced when the awardee is on the compensation committee or a committee chair, and results are robust to a 2SLS estimation using an instrumental variable based on connections to prior award winners. We find evidence that both additional prestigious board appointments and enhanced scrutiny of firms with awardees are channels for improvements in CEO compensation.

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“…Product market competition has been identified as one of the most powerful corporate governance tools for maximizing industrial value [37]. In the face of competition threats, strategies promoting product innovation and capturing market share are encouraged for enhancing product market competition [38]. The relationship between product market competition level and innovation activities is not monotonic [39] containing variables within R&D investment, information asymmetry, trade secrecy, market access and risk, external competition, industrial collaborative agglomeration and so on [40].…”

Section: Enhancing Global Competitionmentioning

confidence: 99%

Regional Comparison and Strategy Recommendations of Industrial Hemp in China Based on a SWOT Analysis

2021

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The hemp (Cannabis sativa L.) industry has great potential growth due to its multifaceted characteristics, however, challenged by the imbalance between the rapid agricultural production growth and the inadequate market. Against the manifesting functional overlapping and homogeneous competition among regions and nations, multi-regional synergistic development strategies of the hemp industry are critical for a sustainable agricultural-industrial system. To propose development strategies and R&D priorities of the hemp agricultural system for multi-regional synergistic development of the hemp industry. A nationwide survey and a SWOT analysis were carried out within five major production provinces in China, which is one of the largest producers of hemp, including Yunnan, Heilongjiang, Shanxi, Inner Mongolia and Jilin. Legislation, distribution, yield and utilization status and their effect on the development of industrial hemp in China were discussed. The SWOT analysis suggested that the negative effects of weaknesses and threats are stronger than the positive effects of strengths and opportunities. The modern hemp industry is still in an early phase of development characterized by the emerging legislation, growing acreage, initial researches and a few applications that pertain to mainstream use in China. Therefore, strategy recommendations, including top-level design, participating in global competition, promoting innovation and enhancing public cooperation, were proposed. We provide strategies for enhancing the hemp agricultural-industrial system, thus enabling policy makers and researchers to master the priority of promoting economic corporation and agricultural science and technology innovation.

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Does exposure to product market competition influence insider trading profitability?

Cited by 31 publications

References 72 publications

Managers’ perception of product market competition and earnings management: a textual analysis of firms’ 10-K reports

Managers’ perception of product market competition and earnings management: a textual analysis of firms’ 10-K reports

Director awards and board effectiveness

Regional Comparison and Strategy Recommendations of Industrial Hemp in China Based on a SWOT Analysis

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