Implications of biased reporting: conservative and liberal accounting policies in oligopolies

• 成果类型: Article
• 署名作者: Friedman, Henry L.; Hughes, John S.; Saouma, Richard
• 署名单位: University of California System; University of California Los Angeles; Utah System of Higher Education; University of Utah
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-015-9342-y
• 发表日期: 2016
• 页码: 251-279
• 关键词: Disclosure policy; Bertrand competition; INFORMATION; cournot; EFFICIENCY; welfare; rules

摘要

We examine the effects of biased (conservative or liberal) reporting on product market competition. Cournot duopolists observe either firm-specific or industry-wide shocks and provide noisy reports subject to an exogenous mandated bias attributed to public policy. Given neutral prior beliefs, either a conservative bias or a liberal bias enhances overall reporting-system informativeness as measured by the reduction of uncertainty. Consistent with previously established effects in the information sharing literature regarding increases in informativeness, we show that expected industry profits and expected consumer surplus may gain or lose from bias, depending on whether the shocks are firm-specific or industry-wide and the degree of product competition. Expected social welfare, however, always increases in bias, irrespective of the source of uncertainty and product substitutability or complementarity. We next consider a setting where firms self-select whether to bias reports and characterize regions of potential conflict with a public policy that maximizes expected social welfare. Further results on the differential effects of conservative or liberal bias follow from relaxing the assumption of neutral prior beliefs.