Title: Industrial competition and earnings quality in Indonesia

Authors: Dedhy Sulistiawan; Felizia Arni Rudiawarni

Addresses: Accounting Department, University of Surabaya, Jl. Raya Kalirungkut, Surabaya 60293, East Java, Indonesia ' Accounting Department, University of Surabaya, Jl. Raya Kalirungkut, Surabaya 60293, East Java, Indonesia

Abstract: This study examines how the industrial competition affects earnings quality. Our study supports the idea of declining earnings quality when firms' risk increases. We expect that low industrial competition or high market concentration decrease firms' risk by generating more stable revenue for companies. This condition stimulates increasing earnings response coefficient (ERC). Generally, using data from Indonesia, our results show that market concentration affects the relation between earnings surprise and excess return. Further, we find that firms in industries with high market concentration generate higher ERC, especially for profit firms. It means, investors are more likely to use positive earnings data for firms in high market concentration industries in reacting earnings surprise. Our paper contributes to market concentration and ERC studies, especially in Indonesia as one of emerging markets. Low industrial competition improves earnings informativeness.

Keywords: market concentration; earnings response coefficient; ERC; industrial competition; Indonesia.

DOI: 10.1504/IJEPEE.2019.099727

International Journal of Economic Policy in Emerging Economies, 2019 Vol.12 No.2, pp.121 - 129

Received: 28 Jun 2018
Accepted: 17 Oct 2018
Published online: 20 May 2019 *

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