The Effect of the Big Eight Accounting Firm Mergers on the Market for Audit Services

Abstract

The research assesses how the two Big Eight mergers of 1989 affected the market for audit services. A data set of 1,978 firms over a 12-year period is used to test four theories of how the mergers could have affected competition and consumer welfare. The study finds that the mergers reduced the marginal costs of auditing large clients. There is no evidence that the mergers were anticompetitive or that they reduced costs for all types of audit buyers.

JEL Classification: L11, L84, M49