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The effect of accounting firm mergers on the market for audit services: New Zealand evidence

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  • Rachel Baskerville
  • David Hay

Abstract

This article examines the outcomes of accounting firm mergers using data about the frequency of audit switches, the numbers of partners in the respective firms, and perceptions revealed in interviews with partners. Evidence from client switches does not show any evidence that the mergers were followed by cost reductions, or of collusion to force prices up. The effects of the mergers appear to have been elsewhere—the merging firms reduced partner numbers substantially, increasing partner leverage so that individual remaining partners were better off. Data from interviews confirm these findings, and show that the culture of individual firms had a significant effect on determining which group of partners controlled the merged firm.

Suggested Citation

  • Rachel Baskerville & David Hay, 2006. "The effect of accounting firm mergers on the market for audit services: New Zealand evidence," Abacus, Accounting Foundation, University of Sydney, vol. 42(1), pages 87-104, March.
    • Handle: RePEc:bla:abacus:v:42:y:2006:i:1:p:87-104
    DOI: 10.1111/j.1467-6281.2006.00186.x
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    Cited by:

    1. Jane Hamilton & Yang Li & Donald Stokes, 2008. "Is the audit services market competitive following Arthur Andersen's collapse?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 48(2), pages 233-258, June.
    2. Juan A. Toscano M. & Maria A. Garcia-Benau, 2014. "Structure and Nature of Competition in the Market for Financial Audit Services in Mexico," Journal of Business Administration Research, Journal of Business Administration Research, Sciedu Press, vol. 3(2), pages 1-10, October.
    3. de Fuentes, Cristina & García Benau, María Antonia & Pucheta Martínez, María Consuelo & Ruiz Barbadillo, Emiliano, 2015. "El éxito de los procesos de fusión en el mercado de auditoría: el caso de PriceWaterhouseCoopers," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 18(1), pages 55-67.
    4. Dirk Simons & Nicole Zein, 2016. "Audit Market Segmentation -- The Impact of Mid-tier Firms on Competition," European Accounting Review, Taylor & Francis Journals, vol. 25(1), pages 131-154, May.
    5. Sailesh Tanna & Ibrahim Yousef & Matthias Nnadi, 2020. "Probability of mergers and acquisitions deal failure," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 13(1), pages 1-30, May.
    6. Paul A. Griffin & David H. Lont & Yuan Sun, 2009. "Governance regulatory changes, International Financial Reporting Standards adoption, and New Zealand audit and non‐audit fees: empirical evidence," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(4), pages 697-724, December.

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