The Effect of Client Industry Agglomerations on Auditor Industry Specialization

• 成果类型: Article
• 署名作者: Knechel, W. Robert; Williams, Devin
• 署名单位: State University System of Florida; University of Florida; University of Auckland; University of Oklahoma System; University of Oklahoma - Norman
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12503
• 发表日期: 2023
• 页码: 1771-1825
• 关键词: knowledge transfer; expertise; geography; INVESTMENT; location; QUALITY; MARKET; identification; Reputations; COMPETITION

摘要

Prior research on auditor industry specialization documents fee premiums for local audit offices that are industry specialists. This research assumes that the effects of specialization are uniform across markets. We examine industry specialization based on the economic theory of industry agglomeration (geographic areas with high industry concentration). Agglomeration economies can facilitate access to knowledge for auditors serving a specific industry in those locations. We find that industry specialists in agglomerations earn a fee premium in excess of specialists in other markets. We find that nonspecialist offices in agglomerations also earn fee premiums in that industry when compared to nonspecialists in other markets even when controlling for these groups' absolute share of the national market. We also address whether or not this expertise can be shared among offices in an agglomeration specialist's firm. We find that audit offices that have easy connections to a within-firm office in an agglomerated market can earn a fee premium relative to more distant offices, suggesting a benefit from knowledge transfer. This fee premium accrues to offices that would not be considered a specialist using traditional market share measures in a given industry. These findings indicate that the benefit of industry specialization depends on more than local market share.