Aggregation of Local Audit Markets
Tilburg University - Tilburg School of Economics and Management
March 4, 2013
This study explores the implications of using spatially aggregated data when testing for supplier differentiation in the market for audit services. I present a statistical model that identifies the nature and sources of aggregation bias when important variation exists within aggregate units, and then subject it to empirical analysis. I find, as predicted, a tendency for aggregation to exacerbate bias from relevant unmeasured factors and to cause researchers to overestimate the impact of market leadership on audit quality. My analysis provides the necessary background for researchers to choose among alternative levels of aggregation in auditing.
Number of Pages in PDF File: 55
Keywords: Aggregation, Supplier differentiation, Audit market, Unit of analysis, Office
JEL Classification: C43, D40, M40working papers series
Date posted: March 14, 2012 ; Last revised: March 5, 2013
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