Does competition encourage unethical behavior? The case of corporate profit hiding in China

  • Cai H
  • Liu Q
  • Xiao G
  • 12

    Readers

    Mendeley users who have this article in their library.
  • N/A

    Citations

    Citations of this article.

Abstract

This paper investigates whether market competition enhances firms’ incentives to hide profits. We develop a theoretical model of firms’ profit hiding behavior in competitive environments and derive several testable hypotheses. We then test the model using a database that covers more than 20,000 large-and-medium-sized industrial firms in China during the period 1995-2002. Our findings show that firms in more competitive market environments — as well as firms in relatively disadvantageous positions — hide a larger share of their profits. This suggests that policies intended to promote competition should be accompanied by policies aiming at strengthening institutional infrastructure and at leveling playing fields.

Author-supplied keywords

  • chinese economy
  • competition
  • firm behavior
  • tax evasion

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

There are no full text links

Authors

  • Hongbin Cai

  • Qiao Liu

  • Geng Xiao

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free