Product market competition and earnings management around open-market repurchase announcements

This study examines how market competition influences the extent and types of earnings management activities around share repurchase announcements. We find that repurchasing firms operating in more competitive industries conduct significantly less downward accrual-based and real activity management than those in less competitive industries. Furthermore, we document that both before and after the passage of the Sarbanes-Oxley Act (SOX), the negative relation between market competition and real earnings management around repurchase announcements remains, while the negative relation between market competition and accrual-based earnings management is only pronounced pre-SOX, but not post-SOX.