Do product market threats discipline corporate misconduct?

Chen, J., Su, X., Tian, X., Xu, B. ORCID: https://orcid.org/0000-0003-3512-5834 and Zhang, X. (2026) Do product market threats discipline corporate misconduct? Journal of Financial and Quantitative Analysis. ISSN 1756-6916 doi: 10.1017/S0022109026102919

Abstract/Summary

We examine the efficacy of product market discipline as a deterrent to corporate misconduct. Firms that are subject to greater competitive threats in the product market are less likely to commit violations and pay lower penalties. Stakeholders react negatively to various types of violations, with product market competition amplifying these stakeholder reactions. In response, firms under competitive pressure are more likely to incorporate ESG-related incentives into executive compensation, demonstrate better worker safety practices, invest in green innovation, and use credible auditors. Our findings suggest that product market competition deters misconduct by increasing the expected costs associated with violations.

Item Type	Article
URI	https://centaur.reading.ac.uk/id/eprint/127161
Identification Number/DOI	10.1017/S0022109026102919
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Cambridge University Press
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