Audit Market Concentration And The Reputation Effect of PwC Global- And Country-Level Market Leadership : Some Evidence From Investor-Perceived Audit Quality

In this study we examine the relation between audit market concentration and investor-perceived audit quality, and whether PwC’s reputation as theworld’s largest auditor conditions the potential adverse impact of concentration on perceived audit quality in countries where PwC has the largest marketshare. Using observations (excluding US firms) for the period 1999-2004 when PwC was the world’s largest auditor, we show that (1) the favorable effectsof Big 4 market dominance (i.e., higher aggregate Big 4 market share) on investor-perceived audit quality is stronger in countries where PwC was themarket leader (PwC ML), and (2) the adverse effects of within Big 4 concentration (i.e., more unequal market shares among the Big 4) on investorperceivedaudit quality is absent in PwC-ML countries. Similar results are obtained with respect to “factual” audit quality in PwC-ML countries.