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Incumbent audit firm pricing: a response to entry of the Big Four accounting firms in India

Incumbent audit firm pricing: a response to entry of the Big Four accounting firms in India Purpose – The purpose of this paper is to explore the audit price reactions of local accounting firms to the entry of the Big Four accounting firms into the Indian audit market, providing unique insight into emerging market dynamics. Design/methodology/approach – Using financial data from Indian audit clients for a ten-year period from 1996 to 2005, the authors conduct a multivariate regression analysis based on extant audit fee literature. Findings – This study finds evidence of a price-cutting strategy on behalf of the local incumbent accounting firms in response to the entry of the Big Four firms. It also shows small-sized incumbent firms to cut prices more drastically relative to medium-sized incumbent firms. Originality/value – This study provides empirical insight into the pricing dynamics of professional services in an emerging market setting. Such insight is increasingly important in our evermore globalized economy where emerging markets are frequently the targets of expansion. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting in Emerging Economies Emerald Publishing

Incumbent audit firm pricing: a response to entry of the Big Four accounting firms in India

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
2042-1168
DOI
10.1108/JAEE-05-2013-0021
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to explore the audit price reactions of local accounting firms to the entry of the Big Four accounting firms into the Indian audit market, providing unique insight into emerging market dynamics. Design/methodology/approach – Using financial data from Indian audit clients for a ten-year period from 1996 to 2005, the authors conduct a multivariate regression analysis based on extant audit fee literature. Findings – This study finds evidence of a price-cutting strategy on behalf of the local incumbent accounting firms in response to the entry of the Big Four firms. It also shows small-sized incumbent firms to cut prices more drastically relative to medium-sized incumbent firms. Originality/value – This study provides empirical insight into the pricing dynamics of professional services in an emerging market setting. Such insight is increasingly important in our evermore globalized economy where emerging markets are frequently the targets of expansion.

Journal

Journal of Accounting in Emerging EconomiesEmerald Publishing

Published: Nov 2, 2015

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