Accounting Firm Association Membership and Audit Firm Growth
52 Pages Posted: 12 Feb 2018 Last revised: 13 Jul 2018
Date Written: July 2018
In this study, we explore a topic of primary concern to small audit firms – attracting new clients. A potential avenue available to small audit firms to enhance their visibility and legitimacy among potential audit clients is to join an association of accounting firms. We examine whether small audit firms with accounting association membership have greater clientele growth than their peer audit firms without association membership. We separately explore growth in private and public clientele. Using hand-collected data, we find that small audit firms with accounting association membership gain approximately 38 percent (5 percent) more private (public) clients over a two-year period than those without association membership. We find that this growth is due to both gaining new entrants into the audit market and winning over clients from competitors. Further, we find that the reputation of an association positively affects the clientele growth seen by member firms.
Keywords: associations, networks, small audit firms, clientele growth, legitimacy
JEL Classification: L22, M40, M41, M42
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