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Measuring productivity growth, technical progress, and efficiency changes of CPA firms prior to, and following the Sarbanes-Oxley Act

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  • Chang, Hsihui
  • Choy, Hiu Lam
  • Cooper, William W.
  • Parker, Barnett R.
  • Ruefli, Timothy W.

Abstract

This paper investigates productivity growth, technical progress, and efficiency change for a group of the 56 largest CPA firms in the US from the period 1996-1999 through the period 2003-2006, where the former preceded, and the latter followed, enactment of the Sarbanes-Oxley Act (SOX). Data envelopment analysis (DEA) is used to calculate Malmquist indices of three measures of interest: productivity growth, technical progress, and efficiency change. Results indicate that CPA firms, on average, experienced a productivity growth of approx. 17% from the pre- to post-SOX period. Consistent with the finding of Banker et al. [Banker RD, Chang H, Natarajan R. Productivity change, technical progress and relative efficiency change in the public accounting industry. Management Science 2005;51:291-304], this productivity gain can be attributed primarily to technical progress rather than a change in relative efficiency. In addition, results indicate that the "Big 4" firms underperformed their non-Big 4 counterparts in both productivity growth and technical progress.

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Bibliographic Info

Article provided by Elsevier in its journal Socio-Economic Planning Sciences.

Volume (Year): 43 (2009)
Issue (Month): 4 (December)
Pages: 221-228

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Handle: RePEc:eee:soceps:v:43:y:2009:i:4:p:221-228

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Web page: http://www.elsevier.com/locate/seps

Related research

Keywords: CPA firms Productivity growth Technical progress Efficiency change SOX DEA Malmquist index Big 4 firms;

References

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  1. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
  2. Scott Whisenant & Srinivasan Sankaraguruswamy & K. Raghunandan, 2003. "Evidence on the Joint Determination of Audit and Non-Audit Fees," Journal of Accounting Research, Wiley Blackwell, vol. 41(4), pages 721-744, 09.
  3. Rajiv D. Banker & Hsihui Chang & Ram Natarajan, 2005. "Productivity Change, Technical Progress, and Relative Efficiency Change in the Public Accounting Industry," Management Science, INFORMS, vol. 51(2), pages 291-304, February.
  4. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
  5. Rajiv D. Banker, 1993. "Maximum Likelihood, Consistency and Data Envelopment Analysis: A Statistical Foundation," Management Science, INFORMS, vol. 39(10), pages 1265-1273, October.
  6. 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.
  7. Emrouznejad, Ali & Parker, Barnett R. & Tavares, Gabriel, 2008. "Evaluation of research in efficiency and productivity: A survey and analysis of the first 30 years of scholarly literature in DEA," Socio-Economic Planning Sciences, Elsevier, vol. 42(3), pages 151-157, September.
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