Earnings management is one of the ways to deal with economic and competitive pressures which aims to provide relevance and reliable information to the market. Due to the importance of competition in competitive markets and confusion about relationship between earnings management and competition in the product market, this research to study the effect of product market power and industry structure on corporate earnings management in Tehran stock exchange during the period from 2005 to 2013. Using systematic sampling method, 167 companies were selected. To test the research hypotheses, Fixed Effect Panel regression analysis was applied. In this study, four criteria include industry-adjusted market power (IAMP) as industry structure criterion, industry competitiveness (INDCOM), number of firms in the industry (NFIND), and industry concentration based on Herfindahl-Hirschman index (HHI) were applied to measure the product market power. Dependent variable is earnings management (EM) which calculated based on adjusted Jones Model. Also, sale volatility (SV), company size (SIZE), market to book value (MTB), long-time financial leverage (LEV), company growth (GROWTH) variables exerted as control variables. According to the research findings all of product market power criteria except NFIND have affected EM negatively. Besides, the research findings show GROWIT and MTB have a positive and significant effects on EM, and SV has a negative and significant effect on it.
