Study On Strategy Choices And Economic Consequences Of Accounting Firms’ Mergers

With the increasing competition in the international market, accounting firmscontinue to grow and develop by merger, which has become an irresistible trend.Throughout the course and development of domestic and international accountingfirms, all big accounting firms become strong by merger. Since1998, domesticaccounting firms have experienced three large merger waves and many domesticscholars study the merger waves from many respects. Throughout foreign anddemotic literature, scholars mainly research on accounting firms’ mergers from astatic perspective, but little literature focuses on the game process of accountingfirm’s mergers from a dynamic perspective and how to choose strategies of mergersby accounting firms under intervention of Chinese regulatory bodies. In addition,domestic scholars mainly analyze the economic consequences of mergers from therespective of the structure of the audit market and change of audit quality, a lack ofsystematic research from the respective of the performance of the different subjects,which to some extent will affect the comprehensiveness of the research on economicconsequences of accounting firms’merge. Based on these, this paper comprehensivelyand systematically researches the strategy choices and economic consequences ofaccounting firms’ mergers from the firms’ performance,audit market performance andthe government performance with empirical data of Chinese audit market.This paper is divided into six chapters. Chapter One is the introduction; ChapterTwo is the domestic and international literature review, which provides reference forthe starting point of this research; Chapter Three is the theoretical basis, whichintroduces and elaborates related theories, including evolutionary game theory,industrial organization theory and government intervention theory; Chapter Fouranalyzes strategies of accounting firms’ mergers from the respective of game theory,gets evolution stable equilibrium of different scenarios by analyzing merger’ gamemodels among accounting firms and the government, and provides some academicsuggestions for government to help domestic accounting firms to become bigger andstronger. Chapter Five empirically analyzes the effect of accounting firms’ mergers onfirms’ performance, market’ performance and government’s performance, withsamples of mergers among accounting firms with the qualification of securities andfutures from2005to2011; Chapter Six summarizes findings of the research and points out the research’shortage and follow-up research.On the selection of merger strategy, this paper establishes a game model with anadvantaged firm, a disadvantaged firm and government and gets the strategies,conditions and possibilities of game equilibrium according to the evolution gametheory. This paper also gives the necessity of government regulators interveningaccounting firms’ mergers and points of intervention, discusses government regulatorshow to change the initial conditions of government and advantaged accounting firms,for the purpose of effective intervention, better mergers of accounting firms andachieving the goal of win-win.On the economic consequences of accounting firms’ mergers, this paper useDEA method performs some empirical test on the changes of accounting firms’ ownperformance w, the changes of audit market’performance and changes of governmentperformance. This paper analyzes mergers’ effect on accounting firms’ performancemainly from the respective of accounting firms’ operational efficiency and scaleefficiency and discovers that the overall operational efficiency of the domesticaccounting firms is greatly improved after the mergers. Mergers also improve thescale efficiency of domestic accounting firms. Mergers affect audit market’performance by promoting the formation of the large-scale audit market andincreasing concentration of audit market after mergers. Mergers affect governmentperformance by the efficient allocation and redistribution of resources, improvingquantity and quality of the audit product and successful changes of governmentdepartments’management mode.The main contribution of this paper is the use of game theory to research thephenomenon of accounting firms’ merger from a dynamic perspective and dovetailingthe government into merger game of the accounting firms, which is more fit to realityand further enriches the relevant studies of accounting firms’ mergers. This paperconducts empirical analysis with empirical data of audit market and tests the effect ofthe policy that domestic accounting firms promote the development of audit market,which also provides some guiding significance and reference for the development ofour own accounting firms.