The pricing of Big 5 industry leadership in the U.S. audit market is investigated using audit fee disclosures for the 2000–2001 fiscal years and the joint nationalcity framework in Ferguson et al. (2003). There is a significant fee premium of 19 percent on those engagements where Big 5 auditors are both the nationally top‐ranked auditor and the city‐level industry leader in the city where the client is headquartered, indicating that national and city‐specific industry leadership jointly affect auditor reputation and pricing. However, there is never a premium in any tests for auditors that are national industry leaders alone without also being city‐specific industry leaders, indicating that national leadership by itself does not result in a premium. The evidence is mixed with respect to city‐specific industry leaders alone that are not also national industry leaders. While there is a premium of 8 percent in the primary tests, this result is inconclusive as it does not hold in all sensitivity analyses.
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1 January 2005
Research Article|
January 01 2005
The Pricing of National and City‐Specific Reputations for Industry Expertise in the U.S. Audit Market
Jere R. Francis;
Jere R. Francis
aUniversity of Missouri–Columbia and University of Melbourne.
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Kenneth Reichelt;
Kenneth Reichelt
bUniversity of Missouri–Columbia.
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Dechun Wang
Dechun Wang
cUniversity of Nebraska–Lincoln.
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Online ISSN: 1558-7967
Print ISSN: 0001-4826
American Accounting Association
2005
The Accounting Review (2005) 80 (1): 113–136.
Citation
Jere R. Francis, Kenneth Reichelt, Dechun Wang; The Pricing of National and City‐Specific Reputations for Industry Expertise in the U.S. Audit Market. The Accounting Review 1 January 2005; 80 (1): 113–136. https://doi.org/10.2308/accr.2005.80.1.113
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