Study On Premium Of Auditor Brand Reputation Based On The Perspective Of Accounting Firm Combination

With reference to the premium of audit fees in accounting firms, there are manystudies, in which some scholars argue that the premium of audit fees is the result ofauditor brand reputation. In consideration of the monopoly position of the “Big4” inthe western countries, the reason for the premium of audit fees, whether brandreputation or monopoly position, is in need of further research. In domestic marketwhere the "Big4" takes less market share than that in the western countries where the"Big4" has not yet reached dominant position, it is considered as a better marketingenvironment to do research on the reasons of premium. The earlier studies usuallyinvestigate the relationship between brand reputation and audit fees among differentfirms from a static perspective. But few references take the perspective of audit firmcombination, being aware of the dynamic change before and after the combination ofaccounting firms. This thesis explores the change of auditing fee in domestic-fundedfirm with the change of its brand reputation since the combination of therepresentative domestic-funded firm with the "Big4".After reviewing existing references, the effect mechanism of premium for brandreputation is explained in this thesis and two theoretical accounts are proposed, whichare the “gilding effect” and the “penetrating effect”. Empirical analysis is the majormethod applied in this thesis. Inspected by the method of multiple-linear regression,the result shows that: there is no gilding effect but the action of attracting customersby low price during the year when the domestic-funded firm combine withforeign-funded firm. But penetrating effect does take place several years after (exceptthe first year) the combination. In terms of the analysis and explanation of theseresults, some suggestions are provided in this paper.This thesis is composed by six chapters. The first chapter is introduction, inwhich the background, research subject, research significance, method and the outlineof this paper are introduced briefly. The second chapter is literature review. The weak points of the earlier studies are found out in order to get the starting point of thisthesis. The third chapter analyzes the effect mechanism of premium for brandreputation, aiming to explain that firm brand reputation can lead to the premium ofauditing fees. The fourth chapter is the empirical survey of the gilding effect of firmbrand reputation, exploring whether the auditing fee from its long-term clientsincreases at the year when the domestic-funded firm combine with the “Big4”.Chapter five inspects the penetrating effect, exploring whether the auditing fee risesafter a long time combination. Chapter six is a conclusion of discovers as well as thelimitations of this thesis with subsequent proposal raised by the final.Proceeding from the brand reputation of the “Big4”, the change of auditing feebrought by brand reputation is studied from the perspective of firm combination.Different from the earlier studies, this thesis takes a dynamic perspective of firmcombination rather than a static perspective to put forward the “gilding effect” and“penetrating effect”. With respect to the reasonableness and possibility of both effect,this thesis does further empirical research.This thesis contributes to introducing Brand Theory of Value and ReputationTheory to the research of auditing fee. And it goes on to represent systematically thereason for premium caused by brand reputation. The reason is further divided into“gilding effect” and “penetrating effect” from the perspective of firm combination,enriching the theory of firm brand reputation. What’s more, this research providesfresh support for economic consequence of auditing activity. In addition, this researchprovides experience for the government to promote the firm stronger and bigger. Itreminds the firm about creating its own brand, becoming stronger and bigger.Adopting the change before and after the combination of domestic-funded andforeign-funded firms, the benefit of combination is revealed. Thus, it initiates freshconsideration of the developing way for domestic-funded firm, leading the firms ofChina to be stronger and bigger by combination.