Local accounting firms’ pricing responses to entry of the Big Four accounting firms into China
Bibliographic record
Abstract
Purpose – The historical development and size of China’s audit market provides an opportunity to investigate important questions regarding the functioning of the market for audit services that are difficult, if not impossible, to test in other globally established markets. The purpose of this paper is to examine the effect of the market entry of the Big Four accounting firms into China on the audit fees charged by its local accounting firms. Design/methodology/approach – In this paper the authors rely primarily on the incumbent pricing literature (Simon, 2005; Geroski, 1995) to assist them in developing the specific hypotheses and empirical tests. This paper is an empirical study, which examines whether local incumbent accounting firms cut prices in response to the Big Four’s entry by using data from annual reports and audit reports for China’s listed companies from the 1994 to 2008 period. Findings – This study shows that local incumbent firms cut prices post-entry. This study also finds that it was local large-sized accounting firms as well as accounting firms located in regions with highly developed- and competitive markets that cut prices in response to the Big Four’s entry. Practical implications – This study has important implications for the Big Four accounting firms as it provides useful information about pricing strategies that would likely be used by local accounting firms in a new market. Local accounting firms in emerging markets can also gain useful insights about the pricing strategies adopted by the Big Four accounting firms when they enter a market. Originality/value – Audit market research has little to offer on how local accounting firms respond in their pricing to the entry of Big Four accounting firms into their market, mainly because in western countries such as Canada, England, and the USA, the Big Four accounting firms are the oldest firms operating in those markets. This paper is the first study that examines the effect of the market entry of the Big Four accounting firms into China.
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.003 | 0.002 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.000 |
| Bibliometrics | 0.001 | 0.001 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.000 | 0.003 |
| Open science | 0.001 | 0.001 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one teacher head, not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".