On the Benefits of Audit Market Consolidation: Evidence from Merged Audit Firms

• 成果类型: Article
• 署名作者: Gong, Qihui; Li, Oliver Zhen; Lin, Yupeng; Wu, Liansheng
• 署名单位: Zhejiang University; National University of Singapore; City University of Hong Kong; Peking University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-51236
• 发表日期: 2016
• 页码: 463-488
• 关键词: industry specialization; QUALITY; fees; determinants; Reputations; expertise; prices; sales; POWER

摘要

We examine efficiency improvement associated with audit firm mergers. Our analysis is made possible by a unique dataset of audit hours in China. We find a significant reduction in audit hours, unaccompanied by a deterioration in audit quality, of merged audit firms. Further, we find a larger reduction in audit hours when acquirers are Chinese domestic Big 10 audit firms and when client firms are more complex. These results are consistent with the notion of economies of scale arising from horizontal mergers. However, enhanced efficiency does not necessarily reduce audit fees. Instead, we find an increase in audit fees when acquirers are international Big 4 audit firms even when we control for possible changes in market power. This premium is at least partially due to the certification effect of international Big 4 audit firms.