Implications of Suppliers and Customers and Industry Competition Density on Accounting Conservatism

Accounting conservatism is often used to measure an enterprise's earnings quality. This study adopted the accounting conservatism indicator of C-Score proposed by Khan and Watts (2009) to explore the correlation between the number of suppliers and customers and accounting conservatism and to further analyze whether the number of suppliers and customers and accounting conservatism produce differences due to the industry competition density. According to the empirical research results, as the number of suppliers and customers increases, earnings conservatism turns higher. The empirical evidence also showed that when the Industry Competition Density is higher, as the number of suppliers and customers increases, earnings conservatism becomes more significant. Different from the previous literature that only discussed industry competition and earnings quality from the perspective of the company, this study considered the number of important suppliers and customers having contract relationships with the company, which is also the main contribution of this research. Therefore, the findings of this study are conducive to understanding that the number of suppliers and customers is an important factor affecting accounting policy in the market competition market. The findings can be used by firm management as a reference to handle relationships between suppliers and customers