A Study Of The Impact Of Mergers Of Public Accounting Firms On Audit Market Performance

It's been a long period since the time when audit research started. With the development of economics, audit plays a more and more important role. And the audit market operation became the focus in audit research. Last century. Big8 gained and dominated the market rapidly by mergers, which forced governments and scholars to worry about the noneffective competition in audit market. In 70s 20 century, the theory of industrial organization began to be used to analyze the audit market operation. From then on. more and more scholars started to do audit market research, including audit market in China.The research of audit market in China focuses on the audit market structure. audit market performance and the connection between them. According to the theory of industrial organization, the behaviors of public accounting firms can affect the performance of audit market directly. However, present researches ignore the connection between behaviors and audit market performance, and the retroaction of firm behavior to audit market structure. Merger of audit firm is also studied as a separate theme but a necessary part in audit market operation. It is the purpose of this paper to analyze the direct affection of audit firm mergers to audit fee and audit quality. They are the different points of audit market performance.There are six chapters in this paper. Chapter 1 is the review about existing literatures. and chapter 2 presents the history of audit market, and the motivation of audit firm mergers. The following chapter 3 introduces the theory of industrial organization and the Structure-Conduct-Performance paradigm, using which to analyze the audit market structure, conduct and performance. The main parts in this paper are chapter 4 and 5. in which is the empirical analysis of audit market. This paper uses the merger cases of auditing firms which have securities and futures audit qualification as samples between 2006 and 2008 to do empirical analysis of audit firm mergers. The last chapter concludes the analysis results and promotes some policy advice.The empirical results provide evidence for understanding the audit market operation. Audit firm scale enlarges, and audit resources redistribute after mergers. That help audit firms improve their service quality and gain the market'conformation. And consumers would like to pay more for higher quality service. The result also means the conduct of merger improve the audit market performance. But there are still many problems during the development of audit market told by the extra descriptive analysis results.The main contributions includes:(1) new point of view in studying audit market. This paper analyze the affection of mergers to audit market performance which was hardly researched before;(2) from two different points-audit fee and audit quality-measuring audit market performance.