Learning from oligopoly rivalry: Implications for business financial statements
Research question: Utilizing the tenets of oligopoly competition that is a well-known type of imperfect rivalry, this study is interested in building a financial theory of inter-company price or pricing (ICP) economics and documenting its direct affinity with corporate financial reporting in general...
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| Format: | Article |
| Language: | English |
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Bucharest University of Economic Studies
2019-12-01
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| Series: | Contabilitate şi Informatică de Gestiune |
| Subjects: |
| _version_ | 1818060327246364672 |
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| author | Mike Onder Kaymaz Ozgur Kaymaz |
| author_facet | Mike Onder Kaymaz Ozgur Kaymaz |
| author_sort | Mike Onder Kaymaz |
| collection | DOAJ |
| description | Research question: Utilizing the tenets of oligopoly competition that is a well-known type of imperfect rivalry, this study is interested in building a financial theory of inter-company price or pricing (ICP) economics and documenting its direct affinity with corporate financial reporting in general and corporate financial statements in particular. It is also interested in executing an analytical application unveiling the straight linkage of ICP with financial disclosure. Motivation: There is an extant body of literature that examines different ICP structures for different companies and industries or markets. However, the literature is silent in corroborating any explicit association that we argue and show does exist between ICP and accounting. To the best of our knowledge, this is the first study to break this silence. Idea: Cost advantage and operating profit are exploited to do the theorization and accounting implementation, by justifying the linkage between ICP and business financial statements. Findings: Investigations show that given that businesses transact or compete with each other at arm’s length terms under oligopoly competition with a Stackelberg game; ceteris paribus, the operating profit figure of the business with cost advantage will be higher than the operating profit figure of the business without cost advantage. Investigations also show that given that businesses transact or compete with each other at arm’s length terms under oligopoly competition with a Stackelberg game; ceteris paribus, asset size, earnings before interest and taxes (EBIT), earnings before taxes (EBT) and hence net income/profit after tax (NPAT) figures of the business with cost advantage will always be higher than asset size, EBIT, EBT and therefore NPAT figures of the business without cost advantage. Investigations further suggest that given that businesses transact or compete with each other at arm’s length terms under oligopoly competition with a Cournot game where there is neither any cost advantage nor disadvantage one way or the other; ceteris paribus, the operating profit, asset size, EBIT, EBT and NPAT figures of the interacting business among the others will be identical. |
| first_indexed | 2024-12-10T13:30:39Z |
| format | Article |
| id | doaj.art-a55b7b558d9f43938d83a7e4cdc102f2 |
| institution | Directory Open Access Journal |
| issn | 1583-4387 2559-6004 |
| language | English |
| last_indexed | 2024-12-10T13:30:39Z |
| publishDate | 2019-12-01 |
| publisher | Bucharest University of Economic Studies |
| record_format | Article |
| series | Contabilitate şi Informatică de Gestiune |
| spelling | doaj.art-a55b7b558d9f43938d83a7e4cdc102f22022-12-22T01:46:59ZengBucharest University of Economic StudiesContabilitate şi Informatică de Gestiune1583-43872559-60042019-12-0118450955810.24818/jamis.2019.04003Learning from oligopoly rivalry: Implications for business financial statementsMike Onder Kaymaz0Ozgur Kaymaz1Clarion University, The United States (U.S.)Turkish Airlines Inc., TurkeyResearch question: Utilizing the tenets of oligopoly competition that is a well-known type of imperfect rivalry, this study is interested in building a financial theory of inter-company price or pricing (ICP) economics and documenting its direct affinity with corporate financial reporting in general and corporate financial statements in particular. It is also interested in executing an analytical application unveiling the straight linkage of ICP with financial disclosure. Motivation: There is an extant body of literature that examines different ICP structures for different companies and industries or markets. However, the literature is silent in corroborating any explicit association that we argue and show does exist between ICP and accounting. To the best of our knowledge, this is the first study to break this silence. Idea: Cost advantage and operating profit are exploited to do the theorization and accounting implementation, by justifying the linkage between ICP and business financial statements. Findings: Investigations show that given that businesses transact or compete with each other at arm’s length terms under oligopoly competition with a Stackelberg game; ceteris paribus, the operating profit figure of the business with cost advantage will be higher than the operating profit figure of the business without cost advantage. Investigations also show that given that businesses transact or compete with each other at arm’s length terms under oligopoly competition with a Stackelberg game; ceteris paribus, asset size, earnings before interest and taxes (EBIT), earnings before taxes (EBT) and hence net income/profit after tax (NPAT) figures of the business with cost advantage will always be higher than asset size, EBIT, EBT and therefore NPAT figures of the business without cost advantage. Investigations further suggest that given that businesses transact or compete with each other at arm’s length terms under oligopoly competition with a Cournot game where there is neither any cost advantage nor disadvantage one way or the other; ceteris paribus, the operating profit, asset size, EBIT, EBT and NPAT figures of the interacting business among the others will be identical.oligopoly competitioncournot modelstackelberg modelcorporate financial reportingcorporate financial statementscost advantageinter-company priceinter-company pricingoperating profitsperfect informationimperfect information |
| spellingShingle | Mike Onder Kaymaz Ozgur Kaymaz Learning from oligopoly rivalry: Implications for business financial statements Contabilitate şi Informatică de Gestiune oligopoly competition cournot model stackelberg model corporate financial reporting corporate financial statements cost advantage inter-company price inter-company pricing operating profits perfect information imperfect information |
| title | Learning from oligopoly rivalry: Implications for business financial statements |
| title_full | Learning from oligopoly rivalry: Implications for business financial statements |
| title_fullStr | Learning from oligopoly rivalry: Implications for business financial statements |
| title_full_unstemmed | Learning from oligopoly rivalry: Implications for business financial statements |
| title_short | Learning from oligopoly rivalry: Implications for business financial statements |
| title_sort | learning from oligopoly rivalry implications for business financial statements |
| topic | oligopoly competition cournot model stackelberg model corporate financial reporting corporate financial statements cost advantage inter-company price inter-company pricing operating profits perfect information imperfect information |
| work_keys_str_mv | AT mikeonderkaymaz learningfromoligopolyrivalryimplicationsforbusinessfinancialstatements AT ozgurkaymaz learningfromoligopolyrivalryimplicationsforbusinessfinancialstatements |