This paper examines whether the type of competition in a market influences the association between the intensity of competition and demand for accounting information. Empirical analysis using a sample of 1,578 hospital‐year observations from hospitals in California finds no association between the intensity of competition and demand for accounting information in the presence of quality competition; however, when firms compete on price, the need to control costs leads to a positive association between the two. In addition, the change in the unit of analysis in the hospital industry from the payer to the ailment increased the demand for accounting information for all California hospitals. This study suggests that competition intensity increases the demand for accounting information under one type of competition (price), but not another (quality competition), and thereby contributes to our understanding of the reasons for the mixed evidence in prior literature on the relation between competition and the demand for accounting information.

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