The paper “Product Market Competition, Legal Institutions, and Accounting Conservatism” written by Ha, Ho, Li, and Zhang (2015; hereafter, HHLZ) builds on the results documented in Dhaliwal, Huang, Khurana, Pereira (2014), which finds a positive relationship between product market competition and conditional conservatism in an American setting. HHLZ find that the Dhaliwal et al. (2014) relationship still exists when conducting a similar analysis using an international sample. HHLZ also conduct a secondary analysis, by partitioning their international sample on the strength of a country's legal institutions. In this secondary analysis, the authors find that product market competition has a positive impact on a firm's conditional conservatism in only those settings where a firm is housed in a country with strong legal institutions. In other words, the positive relationship between product market competition and conditional conservatism that is observed in an American setting (i.e., a setting where legal institutions...
