The effects of non-Big 4 mergers on audit efficiency and audit market competition

• 成果类型: Article
• 署名作者: Kitto, Andrew R.
• 署名单位: University of Massachusetts System; University of Massachusetts Amherst
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2023.101618
• 发表日期: 2024
• 关键词: industry specialization; horizontal mergers; nonaudit services; firm mergers; fees; differentiation; INDEPENDENCE; economies; gains; POWER

摘要

This study examines whether recent mergers between small and midsize accounting firms influence competition by increasing the number of firms that can compete with larger rivals in the U.S. public company audit market. I find that in-market mergers generate efficiencies that are reflected in a post-merger reduction in audit hours but not in reduced audit quality. For both in-market and out-of-market mergers, clients switching to postmerger firms are more likely to be accelerated filers and are significantly larger in terms of several proxies for size and complexity. Lastly, I find that an increase in market-level merger activity is associated with lower profitability of Big 4 firms operating in the same market but only in the smaller client segment. These findings suggest that recent mergers have actually increased competition in some segments of the audit market despite already high concentration and concerns about a lack of sufficient competition. (c) 2023 Elsevier B.V. All rights reserved.