Date of Award

Spring 2019

Degree Name

Bachelor of Science (BS)

Advisor(s)

Mengjie Huang

Abstract

The purpose of this paper is to analyze how product market competition is correlated with the occurrence of fraudulent financial reporting. Given how literature on the association between competition and fraud is both limited and contradictory in results, this paper seeks to implement new measures of competition in order to come to more definitive conclusions. Competition in current literature is confined to concentration measures such as the Herfindahl-Hirschman Index, which ignores other major features of how rivaling firms within an industry interact with each other. By introducing additional product competition measures, mainly measures based on size inequality and profit margins, this study hopes to answer what type of correlation does competition have on fraud and if the addition of these new competition measures increases the explanatory power of concentration measures. These research questions will be answered using a logit regression that incorporates variables that control for firm and industry characteristics, and then analyzed for statistical significance. Overall, the results of this paper will create new opportunities for future studies that rely on measuring competition from an accounting perspective, and help auditors and forensic accountants anticipate fraud based on a client’s external business environment.

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