IDEAS home Printed from
   My bibliography  Save this paper

Audit Market Regulation and Supplier Concentration Around the World: Empirical Evidence


  • Benjamin Heß

    () (Department of Economics, University of Konstanz, Germany)

  • Ulrike Stefani

    () (Department of Economics, University of Konstanz, Germany)


In the ongoing discussions on audit regulation, the key issues of auditor independence and a high level of audit market concentration have become apparent. However, there is the concern that regulations intended to improve auditor independence (i.e., restrictions regarding the joint supply of audit and non-audit services, audit firm rotation, joint audits, etc.) might further increase audit market concentration. We address this issue with an empirical analysis. Based on a cross-country study for the years 2001–2010, we investigate whether a country's audit regulation is connected to the combined market share of the four largest audit firms (Concentration Ratio, CR 4 ), the inequality in the market share distribution (Hirschmann-Herfindahl-Index, HHI), and the number of audit firms per client active in that country's audit market (Auditor Client Ratio). Our final sample consists of 141,190 firm-year observations of listed companies with a total of 2,439 audit firms, taken from 29 countries. The results of our country-fixed-effects models indicate that regulators should take the connections between potentially conflicting goals into account: Whereas the existence of a proportionate liability system and the prohibition of the joint supply of audit and non-audit services significantly decrease supplier concentration, joint audits and the mandatory audit firm rotation significantly increase audit market concentration. Thus, this study points to the need to take into account clients' and audit firms' adaptive strategies to new regulations.

Suggested Citation

  • Benjamin Heß & Ulrike Stefani, 2012. "Audit Market Regulation and Supplier Concentration Around the World: Empirical Evidence," Working Paper Series of the Department of Economics, University of Konstanz 2012-33, Department of Economics, University of Konstanz.
  • Handle: RePEc:knz:dpteco:1233

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Matthew J. Bloomfield & Ulf Brüggemann & Hans B. Christensen & Christian Leuz, 2017. "The Effect of Regulatory Harmonization on Cross-Border Labor Migration: Evidence from the Accounting Profession," Journal of Accounting Research, Wiley Blackwell, vol. 55(1), pages 35-78, March.

    More about this item


    Audit regulation; audit market concentration; empirical study; cross-country-study;

    JEL classification:

    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:knz:dpteco:1233. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Office Ursprung) or (Rebekah McClure). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.