An Analysis of Big 4 Pricing and Firm Size: The Differential Impact of Demand and Supply Shocks on Large and Small Clients

2017 ◽  
Vol 34 (2) ◽  
pp. 204-230 ◽  
Author(s):  
Fatima Alali ◽  
Randal Elder ◽  
Jian Zhou
Keyword(s):  
Small Firm ◽  
Great Recession ◽  
Small Firms ◽  
Unique Contribution ◽  
Demand And Supply ◽  
The Great Recession ◽  
Audit Market ◽  
Sarbanes Oxley ◽  
Big 4 ◽  
Recession Period

We investigate Big 4 pricing over the period of 2000 to 2010. We classify the data into five periods: 2000-2001 as the pre-Sarbanes–Oxley Act (SOX) period, 2002-2003 as the SOX period, 2004-2006 as the Auditing Standard 2 (AS2) period, 2007 as the AS5 period, and 2008-2010 as the Great Recession period. The shocks to the audit market associated with these changes in auditing regulations and the economic environment have differential impacts on large clients and small clients. The percentage of small clients using Big 4 auditors dropped significantly over these shocks, whereas the percentage of large clients using Big 4 auditors experienced a large drop only from the SOX period to the AS2 period. We find that Big 4 pricing increased significantly from the pre-SOX period to the SOX period and continued to increase significantly in the AS2 period. Big 4 pricing experienced a significant decline in the AS5 period and declined insignificantly in the Great Recession period. Big 4 small firm pricing decreased significantly in the AS2 period compared with the SOX period and in the Great Recession period compared with the AS5 period. We find that the Big 4 pricing for small clients is contingent on the nature of competition. The Big 4 charged small firms higher prices in the SOX period, AS5 period, and Great Recession period when competition was lower. Our paper provides a unique contribution as a comprehensive analysis of Big 4 pricing and Big 4 small firm pricing.

scholarly journals HRM and Small-Firm Employee Motivation: Before and After the Great Recession

ILR Review ◽  
2018 ◽  
Vol 72 (3) ◽  
pp. 749-773 ◽  
Author(s):  
Alex Bryson ◽  
Michael White
Keyword(s):  
Small Firm ◽  
Great Recession ◽  
High Performance ◽  
Small Firms ◽  
Employee Motivation ◽  
The Great Recession ◽  
Hrm Practices ◽  
Before And After ◽  
Firm Investments ◽  
Intrinsic Job Satisfaction

A long-running debate in the small-firms’ literature questions the value of formal human resource management (HRM) practices, which have been linked to high performance in larger firms. The authors contribute to this literature by exploiting linked employer–employee surveys for 2004 and 2011. Using employees’ intrinsic job satisfaction and organizational commitment as motivational outcomes, the authors find the returns to small-firm investments in HRM are U-shaped. Small firms benefit from intrinsically motivating work situations in the absence of HRM practices and find this advantage disturbed when formal HRM practices are initially introduced. Firms can restore positive motivation when they invest intensively in HRM practices in a way that characterizes high performance work systems (HWPS). Although the HPWS effect on employee motivation is modified somewhat by the Great Recession, it remains robust and continues to have positive promise for small firms.

Risk Shifts in the Market for Audits: An Examination of Changes in Risk for “Second Tier” Audit Firms

2009 ◽  
Vol 28 (2) ◽  
pp. 93-118 ◽  
Author(s):  
Chris E. Hogan ◽  
Roger D. Martin
Keyword(s):  
Business Risk ◽  
Switching Activity ◽  
Publicly Traded ◽  
Audit Market ◽  
Sarbanes Oxley ◽  
Big 4 ◽  
Audit Firms ◽  
Risk Characteristics ◽  
Changes In Risk ◽  
Second Tier

SUMMARY: The market for audit services has been affected in recent years by significant changes like the demise of Andersen and the implementation of the Sarbanes-Oxley Act of 2002. One impact of these market changes has been an increase in the frequency of auditor switches, and in particular, the frequency of clients switching from Big 4 auditors to smaller audit firms. We examine whether this switching activity has resulted in changes in the risk characteristics of publicly traded clients of Second Tier audit firms. This analysis is important as regulators are concerned about audit market concentration and would like to see the Second Tier audit firms expand their share of the publicly traded client market. Results indicate that Second Tier firms are accepting clients with potentially increased audit and client business risk characteristics relative to their existing client base, but they also appear to be “shedding” clients that have increased audit and client business risk characteristics relative to their existing client base. Some of the differences in risk characteristics for those departing clients are more pronounced in the period after 2000, when we expect the most significant changes in the audit market occurred. Second Tier auditors are increasingly exposed to more business risk as they accept larger clients coming from Big 4 predecessor auditors, which may increase their exposure to litigation.

scholarly journals Did Cuts in State Aid During the Great Recession Lead to Changes in Local Property Taxes?

2014 ◽  
Vol 9 (4) ◽  
pp. 383-416 ◽  
Author(s):  
Rajashri Chakrabarti ◽  
Max Livingston ◽  
Joydeep Roy
Keyword(s):  
School Districts ◽  
Great Recession ◽  
Property Tax ◽  
Negative Relationship ◽  
Local Property ◽  
Relative Increase ◽  
State Aid ◽  
Tax Rate ◽  
The Great Recession ◽  
Recession Period

The Great Recession led to marked declines in state revenue. In this paper we investigate whether (and how) local school districts modified their funding and taxing decisions in response to state aid declines in the post-recession period. Our results reveal school districts responded to state aid cuts in the post-recession period by countering these cuts. Relative to the pre-recession period, a unit decrease in state aid was associated with a relative increase in local funding. To further probe the school district role, we explore whether the property tax rate, which reflects decisions of districts facing budgetary needs, responded to state aid cuts. We find, relative to the pre-recession period, the post-recession period was characterized by a strong negative relationship between property tax rate and state aid per pupil. We also find important heterogeneities in these responses by region, property wealth, and importance of School Tax Relief Program revenue in district budgets.

VALIDATING CHINA'S OUTPUT DATA USING SATELLITE OBSERVATIONS

2018 ◽  
Vol 23 (8) ◽  
pp. 3327-3354 ◽  
Author(s):  
Stephen D. Morris ◽  
Junjie Zhang
Keyword(s):  
Gross Domestic Product ◽  
Nitrogen Dioxide ◽  
Great Recession ◽  
Economic Activity ◽  
National Level ◽  
Satellite Observations ◽  
Dynamic Panel ◽  
Output Data ◽  
The Great Recession ◽  
Recession Period

Can officially reported output figures be externally validated? This paper presents a dynamic panel framework for assessing statistics using verifiable signals of economic activity. In this context, satellite readings of nitrogen dioxide, a byproduct of combustion, are forwarded. The problem of validating China's reported gross domestic product at the sub-national level during two recent downturns is considered. During the Great Recession period, reported figures are validated for some regions, but not others, including specifically those known to be inaccurate.

Determinants of Homeownership among Immigrants: Changes during the Great Recession and Beyond

2018 ◽  
Vol 52 (3) ◽  
pp. 648-694 ◽  
Author(s):  
Kusum Mundra ◽  
Ruth Uwaifo Oyelere
Keyword(s):  
United States ◽  
Length Of Stay ◽  
Great Recession ◽  
Household Income ◽  
The United States ◽  
Citizenship Status ◽  
The Great Recession ◽  
Before And After ◽  
The Impact ◽  
Recession Period

In this paper, we explore factors correlated with immigrant homeownership before and after the Great Recession. We focus solely on immigrants because of recent evidence that suggests homeownership rates declined less for immigrants than natives in the United States during the recession and onward. Specifically, we examine to what extent an immigrant's income, savings, length of stay in the destination country, citizenship status, and birthplace networks affected the probability of homeownership before the recession, and how these impacts on homeownership changed since the recession. We examine these questions using microdata for the years 2000–2012. Our results suggest that citizenship status, birthplace network, family size, savings, household income, and length of stay are significant for an immigrant's homeownership. In comparing the pre‐recession period to the period afterward, we find that the impact of birthplace networks on homeownership probabilities doubled while the impact of savings slightly declined.

scholarly journals The Employment Effects of State Hiring Credits

ILR Review ◽  
2016 ◽  
Vol 70 (5) ◽  
pp. 1111-1145 ◽  
Author(s):  
David Neumark ◽  
Diego Grijalva
Keyword(s):  
Great Recession ◽  
Employment Growth ◽  
Job Creation ◽  
Employment Effects ◽  
The Great Recession ◽  
Job Growth ◽  
The Cost ◽  
The Unemployed ◽  
New Jobs ◽  
Recession Period

State and federal policymakers grappling with the aftermath of the Great Recession sought ways to spur job creation, in many cases adopting hiring credits to encourage employers to create new jobs. Virtually no evidence is available, however, on the effects of these kinds of counter-recessionary hiring credits, with the only evidence coming from much earlier studies of the federal New Jobs Tax Credit in the 1970s. This article provides evidence on the effects of state hiring credits on job growth. Some specific types of hiring credits—including those targeting the unemployed, those that allow states to recapture credits when job creation goals are not met, and refundable hiring credits—appear to have succeeded in boosting job growth, particularly during the Great Recession period and perhaps also during recessions in general. At the same time, some evidence suggests that these credits can generate much more hiring than net employment growth, consistent with the credits encouraging churning of employees that raises the cost of producing jobs through hiring credits.

scholarly journals TREND–CYCLE–SEASONAL INTERACTIONS: IDENTIFICATION AND ESTIMATION

2018 ◽  
Vol 23 (8) ◽  
pp. 3163-3188 ◽  
Author(s):  
Irma Hindrayanto ◽  
Jan P.A.M. Jacobs ◽  
Denise R. Osborn ◽  
Jing Tian
Keyword(s):  
Great Recession ◽  
Household Consumption ◽  
Unobserved Components ◽  
Seasonal Interactions ◽  
Consumption Expenditures ◽  
The Great Recession ◽  
Zero Correlation ◽  
Unobserved Components Model ◽  
Simulation Results ◽  
Recession Period

Economists typically use seasonally adjusted data in which the assumption is imposed that seasonality is uncorrelated with trend and cycle. The importance of this assumption has been highlighted by the Great Recession. The paper examines an unobserved components model that permits nonzero correlations between seasonal and nonseasonal shocks. Identification conditions for estimation of the parameters are discussed from the perspectives of both analytical and simulation results. Applications to UK household consumption expenditures and US employment reject the zero correlation restrictions and also show that the correlation assumptions imposed have important implications about the evolution of the trend and cycle in the post-Great Recession period.

scholarly journals Characterization of Pre- and Recession Periods for the Indiana Workforce

2019 ◽  
Author(s):  
William Sellers
Keyword(s):  
Labor Force ◽  
Great Recession ◽  
Categorical Variables ◽  
The Great Recession ◽  
Time Period ◽  
The Impact ◽  
Recession Period

This paper studies the impact of The Great Recession period and the time period prior to the Indiana labor force. Specifically, it aims to show the impact across a variety of demographic, categorical variables (e.g. sex, age, and race).

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