Non-Big 4 Local Market Leadership and Its Effect on Competition

Posted: 9 Aug 2013 Last revised: 16 Jun 2015

See all articles by Marsha B. Keune

Marsha B. Keune

University of Dayton

Brian W. Mayhew

University of Wisconsin - Madison - Department of Accounting and Information Systems

Jaime J. Schmidt

University of Texas at Austin

Date Written: May 28, 2015

Abstract

This study examines local characteristics associated with non-Big 4 local market leadership and the impact of non-Big 4 local market leadership on competition. We identify non-Big 4 local market leaders by collecting accounting firm rankings from business publications for 46 of the largest metropolitan statistical areas from 2005-2010. These rankings are based on the number of local office employees and provide a more holistic measure of office size than measures based on public company audit fees. We find local supply and demand factors are significantly associated with non-Big 4 local market leadership and that non-Big 4 leadership is associated with lower overall audit fees in the local market. We also find that non-Big 4 leaders earn a fee premium over other non-Big 4 auditors. Our results imply that non-Big 4 leaders increase local market competition.

Keywords: local audit market; Big 4 market competition; audit fee premium

JEL Classification: M41

Suggested Citation

Keune, Marsha B. and Mayhew, Brian W. and Schmidt, Jaime J., Non-Big 4 Local Market Leadership and Its Effect on Competition (May 28, 2015). Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2307842 or http://dx.doi.org/10.2139/ssrn.2307842

Marsha B. Keune

University of Dayton ( email )

Dayton, OH 45469
United States

Brian W. Mayhew (Contact Author)

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States
608-262-2714 (Phone)
608-263-0477 (Fax)

Jaime J. Schmidt

University of Texas at Austin ( email )

Austin, TX 78712
United States

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