An empirical test of spatial competition in the audit market
AbstractThis study empirically examines the effects of competition through differentiation on audit pricing. Based on prior economic theory on differentiated-product markets (e.g., Hotelling, 1929; Tirole, 1988), we hypothesize that audit fees are affected by an auditor's relative location in a market segment. We define audit markets per industry segment and U.S. Metropolitan Statistical Area and specify an auditor's industry location relative to the client (auditor–client industry alignment) and relative to the closest competitor (industry market share distance to closest competitor). We find that audit fees increase in both auditor–client industry alignment and industry market share distance to the closest competitor.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Accounting and Economics.
Volume (Year): 53 (2012)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/jae
Audit markets; Price competition; Industry specialization; Differentiation;
Find related papers by JEL classification:
- M40 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - General
- M20 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - General
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Degryse, H.A. & Ongena, S., 2003.
"Distance, Lending Relationships, and Competition,"
2003-123, Tilburg University, Center for Economic Research.
- Degryse, H.A. & Ongena, S., 2002. "Distance, Lending Relationships and Competition," Discussion Paper 2002-16, Tilburg University, Center for Economic Research.
- Hans Degryse & Steven Ongena, 2002. "Distance, Lending Relationships, and Competition," CSEF Working Papers 80, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
- Dedman, Elisabeth & Lennox, Clive, 2009. "Perceived competition, profitability and the withholding of information about sales and the cost of sales," Journal of Accounting and Economics, Elsevier, vol. 48(2-3), pages 210-230, December.
- Stiglitz, Joseph E, 1987. "Competition and the Number of Firms in a Market: Are Duopolies More Competitive than Atomistic Markets?," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1041-61, October.
- Emilie Feldman, 2006. "A Basic Quantification of the Competitive Implications of the Demise of Arthur Andersen," Review of Industrial Organization, Springer, vol. 29(3), pages 193-212, November.
- Willekens, Marleen & Achmadi, Christina, 2003. "Pricing and supplier concentration in the private client segment of the audit market: Market power or competition?," The International Journal of Accounting, Elsevier, vol. 38(4), pages 431-455.
- Kenneth J. Reichelt & Dechun Wang, 2010. "National and Office-Specific Measures of Auditor Industry Expertise and Effects on Audit Quality," Journal of Accounting Research, Wiley Blackwell, vol. 48(3), pages 647-686, 06.
- Dye, Ronald A., 1991. "Informationally motivated auditor replacement," Journal of Accounting and Economics, Elsevier, vol. 14(4), pages 347-374, December.
- Francis, Jere R., 1984. "The effect of audit firm size on audit prices : A study of the Australian Market," Journal of Accounting and Economics, Elsevier, vol. 6(2), pages 133-151, August.
- Sharad Asthana & Steven Balsam & Sungsoo Kim, 2009. "The effect of Enron, Andersen, and Sarbanes-Oxley on the US market for audit services," Accounting Research Journal, Emerald Group Publishing, vol. 22(1), pages .4-26, July.
- Willekens, Marleen, 2003. "Reply to discussion of "Pricing and supplier concentration in the private client segment of the audit market: Market power or competition?"," The International Journal of Accounting, Elsevier, vol. 38(4), pages 461-464.
- Shapiro, Carl, 1989. "Theories of oligopoly behavior," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 6, pages 329-414 Elsevier.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
- Craswell, Allen T. & Francis, Jere R. & Taylor, Stephen L., 1995. "Auditor brand name reputations and industry specializations," Journal of Accounting and Economics, Elsevier, vol. 20(3), pages 297-322, December.
- DeAngelo, Linda Elizabeth, 1981. "Auditor independence, `low balling', and disclosure regulation," Journal of Accounting and Economics, Elsevier, vol. 3(2), pages 113-127, August.
- Bruynseels, Liesbeth & Willekens, Marleen, 2012. "The effect of strategic and operating turnaround initiatives on audit reporting for distressed companies," Accounting, Organizations and Society, Elsevier, vol. 37(4), pages 223-241.
- Wen-Chung Guo & Fu-Chuan Lai, 2014. "Spatial price discrimination and location choice with labor markets," The Annals of Regional Science, Springer, vol. 52(1), pages 103-119, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.