In this paper, we employ a firm-level measure of product market competition constructed from the textual analysis of firms' 10-K filings to examine the relationship between managers' perceived competition pressure and earnings management. We find that accounting irregularities and accrual-based earnings management are positively related to product market competition. This finding is consistent with the notion that competition pressure increases managerial incentives to manage earnings, due to their career concerns.We also find that real earnings management is negatively related to product market competition. This finding suggests that real earnings management involves actions that decrease firms' competitiveness and thus is costly for firms confronted with high competition pressure. K E Y W O R D Saccounting irregularities, career concerns, earnings management, product market competition, real activities manipulation, textual analysis 604

This paper examines the effect of corporate social responsibility (CSR) on the number of bond covenants. We find that a high CSR score has a negative association with the number of bond covenants. Moreover, our results are more pronounced for firms with a high bidask spread and high agency costs. Our analysis highlights the effect of the good stakeholder relationship on the bond contracts.

Hilary and Hui (2009) argue that the prevailing social norms, such as religious beliefs, affect not only individual decisions but also corporate decisions. They document that companies headquartered in more religious areas tend to make more conservative investment decisions and have lower-risk exposures. McGuire et al. (2012) find that firms headquartered in areas with stronger religious social norms tend to have fewer financial reporting irregularities. Callen and Fang (2015) document a negative relation between the religiosity at a firm's headquarters and its stock price crash risk. In addition, religion is shown to be associated with reduced risk taking by fund managers (Shu et al. 2012;Gao et al. 2015), banks (Adhikari and Agrawal 2016b), and entrepreneurs (Jiang et al. 2015).In this study, we examine whether a religious environment influences a firm's capital structure and the contracting between shareholders and creditors. Theoretically, local religiosity may affect a firm's debt financing and contracts through three channels. First, debt borrowing is often viewed in a negative light by religious teaching. In the Bible, financial debt is described as a form of bondage (Proverb 22:7) and a curse for disobeying God (Deuteronomy 28:43-45). 2 Borrowing beyond one's means and the subsequent inability to repay the debt are even deemed "wicked" (Psalm 37:21). The cancelation of debt in the Jubilee years, however, is blessed in the Bible (Deuteronomy 15:1-4). Lending is also described as a blessing from God (Deuteronomy 15:6). In Islam, any interest-bearing debt is viewed as usury and is Abstract Previous studies substantiate that religious social norms influence individual and organizational decisions. Using debt financing settings, we examine whether a firm's religious environment influences outside parties' perceptions in contracting with the firm. We document that firms located in the more religious areas use less debt financing and receive better credit ratings. Bond investors require lower yields and impose fewer covenants on such firms. Using the 2002 revelation of sex abuse by Catholic priests as an exogenous shock, we verify that these findings are not driven by endogeneity issues. Our study highlights the role of social norms in financial transactions.

No abstract

No abstract