Auditor Concentration, Business Diversification and Performance: Application of Structure-Conduct-Performance Paradigm

• Main Authors: Chia-Chi Lee, 李家琪
• Other Authors: Wen-Jing Chang
• Format: Others
• Language: en_US
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/00421061593222446141

博士 === 國立雲林科技大學 === 管理研究所博士班 === 95 === This study investigates the degree of Taiwan’s auditor concentration and changes in market structures for the public accounting profession during a long-term period. In order to acquire a clear knowledge of influences of market structures and accounting firms’ conduct on the performance, the structure-conduct-performance (SCP) paradigm is used. Empirical data are obtained from the 1992-2003 Survey Report of Public Accounting Firms in Taiwan, published by the Financial Supervisory Commission, Executive Yuan, Taiwan, the Republic of China. Main findings are as follows. At first, market structure demonstrates that the public accounting profession is developing towards a high degree of concentration. In addition, for the entire industry, the degree of imperfect competition is getting higher and higher. The entire industry as well as different types of accounting firms, including big 6, large, medium and small, are all at the stage of imperfect competition. The big 6, medium and small accounting firms are moving towards perfect competition, whereas the degree of imperfect competition of large accounting firms is getting higher and higher. With the respect to business sub-markets, the big 6, large, medium and small accounting firms are all at the stage of imperfect competition, too. However, the competitive degrees in business sub-markets of big 6 accounting firms, including audit, tax, management consultancy, corporate registration and other services businesses, are apparently different from the other three types of accounting firms. In addition, the average competitive degree of big 6 accounting firms is the highest. Second, as a percentage of total revenues, the ratio of tax business is the highest followed by audit business, corporate registration and other services, and management consultancy business. For different types of accounting firms, the big 6 accounting firms mainly focus on the audit business, large accounting firms put great importance on the tax and audit businesses, and medium and small accounting firms concentrate on the tax business. From the perspective of business diversification, compared with the other three types of accounting firms, the big 6 accounting firms are likely to engage in a higher degree of business diversification, and small accounting firms have the lowest degree of business diversification among the four types of accounting firms. Third, by adopting the “SCP paradigm”, this study developed a regression model of relation between market structures, conduct of accounting firms and the performance. Empirical results show that, for the entire industry, the degree of imperfect competition of accounting firms is positively related to performance, indicating that the degree of imperfect competition is getting higher, the market will go towards oligopoly, which will lead to a stronger profitability and improve the performance of accounting firms. The degree of business diversification is also positively related to performance, indicating that business diversification will make a positive contribution to the performance of accounting firms. Finally, this study further discussed the effects of competition degree and business diversification on the performance for various types of accounting firms. The results show that the degrees of imperfect competition of big 6, medium and small accounting firms are positively related to performance significantly. The association between degree of business diversification and performance is positive in big 6 but negative significantly in small accounting firms.