The Public Accounting Industry Production Function

Posted: 12 Feb 2003

See all articles by Rajiv D. Banker

Rajiv D. Banker

Temple University - Department of Accounting

Hsihui Chang

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management

Reba Cunningham

affiliation not provided to SSRN

Abstract

A translog function is specified to represent the relation between revenue and human resource inputs in public accounting firms. Estimation of the model using a balanced panel of annual data for 64 large CPA firms for the period 1995-1999 indicates that increasing returns to scale prevail in the public accounting industry, justifying recent merger and acquisition activities among accounting firms. Average marginal revenue product of partners increased monotonically from 1995 to 1998, decreased slightly in 1999, and was about nine times that of other professionals during 1995-1999. The public accounting industry exhibited continuing improvement in productivity over the five years.

Keywords: public accounting, scale economies, marginal revenue products, Big Five firms, CPA partner compensation, production function

JEL Classification: M49, D24, L11

Suggested Citation

Banker, Rajiv D. and Chang, Hsihui and Cunningham, Reba, The Public Accounting Industry Production Function. Journal of Accounting and Economics, Vol. 35, No. 2, April 2003. Available at SSRN: https://ssrn.com/abstract=374980

Rajiv D. Banker (Contact Author)

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Hsihui Chang

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management

Riverside, CA 92521
United States
951-827-4284 (Phone)

Reba Cunningham

affiliation not provided to SSRN

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,792
PlumX Metrics