The Effects of Concentration on Competition and Efficiency : Some Evidence from the French Audit Market

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The Effects of Concentration on Competition and Efficiency : Some Evidence from the French Audit Market

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Géraldine Broye
Laurent Weill () (Laboratoire de Recherche en Gestion et Economie, Institut d'Etudes Politiques, Strasbourg)

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Laurent Weill

Abstract

This paper aims at investigating the effects of concentration on competition and cost efficiency of the French audit market. Competition is measured with the Rosse-Panzar model, while cost efficiency is estimated with stochastic frontier approach. Cost efficiency levels are estimated at around 75% with greater efficiency for Big-Four firms, while the nature of competition appears to be monopolistic competition. Dynamic analysis shows a reduction in competition, and a decrease in cost efficiency for Big-Four and non-Big-Four firms between 1999 and 2003. We therefore provide support to a negative impact of concentration on competition and cost efficiency.

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Paper provided by Laboratoire de Recherche en Gestion et Economie, Université de Strasbourg (France) in its series Working Papers of LaRGE (Laboratoire de Recherche en Gestion et Economie) with number 2008-04.

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Date of creation: 2008
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Handle: RePEc:lar:wpaper:2008-04

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Find related papers by JEL classification:
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
M4 - Business Administration and Business Economics; Marketing; Accounting - - Accounting

This paper has been announced in the following NEP Reports:

NEP-ACC-2008-03-01 (Accounting & Auditing)
NEP-ALL-2008-03-01 (All new papers)
NEP-COM-2008-03-01 (Industrial Competition)
NEP-EFF-2008-03-01 (Efficiency & Productivity)
NEP-MIC-2008-03-01 (Microeconomics)

References listed on IDEAS
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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. [Downloadable!] (restricted)
Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law & Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
Greene, William H., 1990. "A Gamma-distributed stochastic frontier model," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 141-163. [Downloadable!] (restricted)
Sullivan, Mary W, 2002. "The Effect of the Big Eight Accounting Firm Mergers on the Market for Audit Services," Journal of Law & Economics, University of Chicago Press, vol. 45(2), pages 375-99, October.
Stijn Claessens & Luc Laeven, 2004. "What drives bank competition? Some international evidence," Proceedings, Federal Reserve Bank of Cleveland, pages 563-592.
Other versions:
- Claessens, Stijn & Laeven, Luc, 2003. "What drives bank competition? some international evidence," Policy Research Working Paper Series 3113, The World Bank. [Downloadable!]
- Claessens, Stijn & Laeven, Luc, 2004. "What Drives Bank Competition? Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 563-83, June.
Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July. [Downloadable!] (restricted)

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