Evidence of Non-Big 6 Market Specialization and Pricing Power in a Niche Assurance Service Market

Posted: 16 Jun 1999


Elliott and Pallais (1997) indicate the importance of finding an appropriate market niche when entering the assurance services market. They discuss the notion that the pricing of these assurance services can be based on the value of the services to the market, and provide an example of such pricing in a regulatory compliance setting. Auditing requirements in the pension plan audit market extend beyond those required by GAAS to include assurance regarding compliance with relevant regulations. Additionally, the Big 6 CPA firms have a fairly small market share (about 10 percent) in this market (Cullinan 1997). The pension plan environment, therefore, provides an opportunity to examine whether smaller CPA firms can establish a "brand name" in a niche assurance service market to distinguish their expertise, and thereby receive higher fees. This study examines the effects of industry expertise on audit fees in the multi-employer pension plan context. Results indicate that non-Big 6 firms with industry expertise (as measured by market share) receive fee premiums over nonspecialist firms. Big 6 firms with larger market shares do not receive fee premiums in this market. These results suggest that non-Big 6 firms may be able to obtain, and benefit from, market positions in certain nice assurance service markets.

JEL Classification: M49, L11

Suggested Citation

Cullinan, Charles P., Evidence of Non-Big 6 Market Specialization and Pricing Power in a Niche Assurance Service Market. Available at SSRN: https://ssrn.com/abstract=165920

Charles P. Cullinan (Contact Author)

Bryant University ( email )

1150 Douglas Pike
College of Business
Smithfield, RI 02917-1284
United States
401-232-6421 (Phone)
401-232-6319 (Fax)

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