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Audit Firm Differentiation through Intellectual Property as a Means to Soften Price Competition

Author

Listed:
  • Marleen Willekens
  • Simon Dekeyser
  • Lars Van Cutsem
  • Victor S Zuiddam

Abstract

This study examines whether audit firm differentiation signaled through the strength of its intellectual property (IP) portfolio softens price competition. Following the patent and trademark literature, we focus on the stock of these intellectual property rights as an indicator of audit firm differentiation capturing an audit firm’s brand strength and technological capabilities. We hypothesize that the audit fee charged by an audit firm is increasing in its IP portfolio strength, ceteris paribus. Employing data on intellectual property (IP) of U.S. audit firms, in terms of branding and technological capabilities, we identify all active trademarks and patents for the 50 largest U.S. audit firms between 2004 and 2022. Our results suggest that the strength of an audit firm’s portfolio of trademarks and patents is significantly positively associated with audit fees, suggesting that branding and technological capabilities are means for audit firms to soften price competition through IP differentiation.

Suggested Citation

  • Marleen Willekens & Simon Dekeyser & Lars Van Cutsem & Victor S Zuiddam, 2024. "Audit Firm Differentiation through Intellectual Property as a Means to Soften Price Competition," Working Papers Department of Accountancy, Finance and Insurance (AFI), Leuven 742971, KU Leuven, Faculty of Economics and Business (FEB), Department of Accountancy, Finance and Insurance (AFI), Leuven.
    • Handle: RePEc:ete:afiper:742971
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    G074819N#54967485;

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