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An empirical study of returns to scale of CPA firms in the post SOX era

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  • Hsihui Chang
  • Hiu Choy
  • Iny Hwang

Abstract

This paper performs empirical tests for the returns to scale pattern of certified public accountant (CPA) firms in the post Sarbanes–Oxley Act (SOX) era using data envelopment analysis. Analyzing a sample of 70 of the top 100 CPA firms from Accounting Today surveys over the 6 years period 2005–2010, we find that our sample CPA firms as a whole exhibit decreasing returns to scale in the post SOX era, suggesting that these CPA firms had exhausted scale economies by expansions through mergers and acquisitions and organic growth. Thus, these firms may consider stopping their expansion plans and downsizing or divestitures in order to improve their production efficiency. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Hsihui Chang & Hiu Choy & Iny Hwang, 2015. "An empirical study of returns to scale of CPA firms in the post SOX era," Annals of Operations Research, Springer, vol. 229(1), pages 253-264, June.
    • Handle: RePEc:spr:annopr:v:229:y:2015:i:1:p:253-264:10.1007/s10479-015-1826-4
    DOI: 10.1007/s10479-015-1826-4
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    2. Rajiv Banker & Rong Huang & Yinghua Li & Sha Zhao, 2021. "Do Accounting Standards Matter for Productivity?," Production and Operations Management, Production and Operations Management Society, vol. 30(1), pages 68-84, January.

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