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The Effect Of Audit Market Deregulation On Audit Competition And Quality

Author

Listed:
  • Marios Fasoulas
  • Evangelos Chytis

    (Department of Accounting and Finance, University of Ioannina, Greece)

Abstract

Purpose- This paper examines the effect of minimum audit fee reserve deregulation on audit quality. Specifically, we examine the impact of the 2011 audit fee deregulation in Greece. Design/methodology/approach- Our sample consists of 120 firms listed on the Athens Stock Exchange, from twelve industries. The period of observation is 10 years, with 1.200 firm-year observations. The examined period is divided into the five years prior to the deregulation (2007-2011) and those after it (2012-2016) to illustrate the impact of the audit deregulation. We use earnings quality as an audit quality proxy, set various independent variables as suggested by existing literature and conduct a difference in difference (DID) analysis and robustness tests. To estimate abnormal accruals we use the same model as Han and Wang (1998). Findings- Our results indicate a statistically significant negative relationship between audit quality and deregulation, which suggests that augmented competition of audit firms has a negative effect on audit quality. Originality/value- This study adds the case of Greece to the existing literature on the impact of audit deregulation on audit quality. The results corroborate the stream of research that finds a positive association between audit fee deregulation and audit quality decrease. To the authors’ best knowledge, this is the first similar study conducted in a European economy. In addition, our findings suggest that policy makers should carefully plan deregulations especially in jurisdictions with an emerging capital market distinguished by a low degree of supervisory effectiveness and poor investor protection mechanisms.

Suggested Citation

  • Marios Fasoulas & Evangelos Chytis, 2025. "The Effect Of Audit Market Deregulation On Audit Competition And Quality," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 24(1), pages 5-25, March.
    • Handle: RePEc:ami:journl:v:24:y:2024:i:1:p:5-25
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    References listed on IDEAS

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    More about this item

    Keywords

    Audit quality; deregulation; audit fees; earnings quality; audit firm competition;
    All these keywords.

    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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