The Study On Operational Efficiency Of The Accounting Firms In China On The Basis Of DEA-Malmquist Method

With the deepening of economic integration around the world, the globalization in accounting services industry has taken shape. By December 31, 2014, the number of accounting firms in China has reached 8, 295. These firms are offering professional services for more than 4.2 million businesses, administrative units and public institutions as well as auditing and attestation services for over 2, 500 listed companies. The statistics have been a proof of China’s rapid development in CPA profession. Meanwhile, China’s CPA profession is also faced with a series of challenges and opportunities. The global competition and technical innovation in accounting have a profound impact on this profession. With the background of constant expansion in operations and increasing competition in global market, the accounting firms have no option but to improve their own operational efficiency, which is a guarantee to maintain the sustainable development of the firms and a vital indicator to evaluate their performances.The paper is devoted to examining the differences in operational efficiency between the local accounting firms and international accounting firms in China in terms of input-output ratio. The focus of this study is the operational efficiency of Chinese accounting firms. To elaborate on this, the paper is based on the data of Top 100 accounting firms released by the Chinese Institute of Certified Public Accountants(CICPA) from the year 2010 to 2013 and takes 50 of these firms which have continuous data as study samples. The paper selects eight indicators of input and one indicator of output available, calculating and analyzing by categories the annual operational efficiency of the 50 accounting firms in the studied four years, with the application of the static BCC model of DEA for the very first time. The paper also uses the dynamic Malmquist index model to calculate and analyze the total factor productivity of the 50 accounting firms by making intertemporal comparisons, i.e., the annual productivity of each firm against that of the previous year. The paper then makes analysis by categories and points out the direction for further improvement.Finally, the paper, with the basis on the empirical research of the operational efficiency of accounting firms in China, makes suggestions on optimization for different kinds of accounting firms, according to their distinctive developing status. These suggestions are aimed to narrow the gap between local accounting firms and the “Big Four” and increase the operational efficiency of local accounting firms so as to promote the development of China’s CPA profession, optimize the resources of accounting firms and enhance the competitiveness of Chinese accounting firms.