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Productivity Change, Technical Progress, and Relative Efficiency Change in the Public Accounting Industry

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  • Rajiv D. Banker

    () (Anderson Graduate School of Management, University of California at Riverside, Riverside, California 92521)

  • Hsihui Chang

    () (Anderson Graduate School of Management, University of California at Riverside, Riverside, California 92521)

  • Ram Natarajan

    () (School of Management, The University of Texas at Dallas, Richardson, Texas 75083-0688)

Abstract

We present evidence on components of productivity change in the public accounting industry toward the end of the 20th century. Using revenue and human resource data from 64 of the 100 largest public accounting firms in the United States for the 1995--1999 period, we analyze productivity change, technical progress, and relative efficiency change over time. The average public accounting firm experienced a productivity growth of 9.5% between 1995 and 1999. We find support for the hypothesis that technical progress rather than an improvement in relative efficiency was the reason for this productivity growth. Firms that were early movers into management advisory services (MAS) and those that emphasized growth in MAS over growth in the traditional audit and tax services enjoyed significantly higher productivity growth than their peers. These firms also contributed significantly more to the industry's technical progress.

Suggested Citation

  • 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.
  • Handle: RePEc:inm:ormnsc:v:51:y:2005:i:2:p:291-304
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    File URL: http://dx.doi.org/10.1287/mnsc.1040.0324
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    References listed on IDEAS

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    1. repec:pal:jorsoc:v:61:y:2010:i:12:d:10.1057_jors.2009.142 is not listed on IDEAS
    2. Chang, Hsihui & Choy, Hiu Lam & Cooper, William W. & Parker, Barnett R. & Ruefli, Timothy W., 2009. "Measuring productivity growth, technical progress, and efficiency changes of CPA firms prior to, and following the Sarbanes-Oxley Act," Socio-Economic Planning Sciences, Elsevier, vol. 43(4), pages 221-228, December.
    3. repec:kap:jrefec:v:57:y:2018:i:1:d:10.1007_s11146-017-9640-1 is not listed on IDEAS
    4. Chang, Hsihui & Choy, Hiu Lam & Cooper, William W. & Ruefli, Timothy W., 2009. "Using Malmquist Indexes to measure changes in the productivity and efficiency of US accounting firms before and after the Sarbanes-Oxley Act," Omega, Elsevier, vol. 37(5), pages 951-960, October.
    5. Davutyan, Nurhan & Demir, Mert & Polat, Sezgin, 2010. "Assessing the efficiency of Turkish secondary education: Heterogeneity, centralization, and scale diseconomies," Socio-Economic Planning Sciences, Elsevier, vol. 44(1), pages 35-44, March.
    6. Mircea Epure & Esteban Lafuente, 2015. "Monitoring bank performance in the presence of risk," Journal of Productivity Analysis, Springer, vol. 44(3), pages 265-281, December.
    7. Chien-Ming Chen & Magali A. Delmas & Marvin B. Lieberman, 2015. "Production frontier methodologies and efficiency as a performance measure in strategic management research," Strategic Management Journal, Wiley Blackwell, vol. 36(1), pages 19-36, January.
    8. Zhang, Daqun & Banker, Rajiv D. & Li, Xiaoxuan & Liu, Wenbin, 2011. "Performance impact of research policy at the Chinese Academy of Sciences," Research Policy, Elsevier, vol. 40(6), pages 875-885, July.
    9. Peyrache, Antonio, 2013. "Industry structural inefficiency and potential gains from mergers and break-ups: A comprehensive approach," European Journal of Operational Research, Elsevier, vol. 230(2), pages 422-430.
    10. Peyrache, Antonio, 2015. "Cost constrained industry inefficiency," European Journal of Operational Research, Elsevier, vol. 247(3), pages 996-1002.
    11. Bao-Guang Chang & Tai-Hsin Huang & Chun-Yi Kuo, 2015. "A comparison of the technical efficiency of accounting firms among the US, China, and Taiwan under the framework of a stochastic metafrontier production function," Journal of Productivity Analysis, Springer, vol. 44(3), pages 337-349, December.
    12. Antonio Peyrache, 2014. "Cost Constrained Industry Inefficiency," CEPA Working Papers Series WP042014, School of Economics, University of Queensland, Australia.
    13. Chang, Shyr-Juh & Hsiao, Hsing-Chin & Huang, Li-Hua & Chang, Hsihui, 2011. "Taiwan quality indicator project and hospital productivity growth," Omega, Elsevier, vol. 39(1), pages 14-22, January.
    14. repec:eee:rensus:v:78:y:2017:i:c:p:1331-1349 is not listed on IDEAS
    15. Chen, Chien-Ming & van Dalen, Jan, 2010. "Measuring dynamic efficiency: Theories and an integrated methodology," European Journal of Operational Research, Elsevier, vol. 203(3), pages 749-760, June.
    16. Samagaio, Antonio & Rodrigues, Ricardo, 2016. "Human capital and performance in young audit firms," Journal of Business Research, Elsevier, vol. 69(11), pages 5354-5359.

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