Abstract

The objective of this paper is to examine the effect of concentration in audit market on auditor competition. Specifically, we investigate how auditor concentration measured by industry－year Herfindahl Index influences auditor competition measured by auditor reappointment. Further, we also explore auditor competition in the perspective of audit fee. There have been concerns that the concentrated audit market by Big 4 hinders the competition between auditors, leading to decrease in audit quality while increase in audit fee. Several previous studies focus on listed firms in the capital market and report mixed results. Therefore, further research needs to address non－listed firms. This paper use the sample of 32,099 firm－year observations that are subject to statutory audit in Korea over the period of 2012－2015. We find that auditor concentration is not significantly related with auditor reappointment. This finding holds for the result using auditor competition measured by audit fee. The result of this paper extends prior literature by adding further evidence on non－listed firms. Also, this paper makes contribution to the literature by providing the refined empirical results for non－listed firms.

Keywords

• audit market concentration
• auditor competition
• auditor reappointment
• audit fee

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