The post-SOX comparative dynamics of public accounting firm efficiency

Purpose: This paper aims to analyze the differences in the efficiency of public accounting firms across both firms and countries in the post-Sarbanes-Oxley world. It also investigates the issues surrounding the dynamics of their efficiency gaps. Design/methodology/approach: This study uses four-stage data envelopment analysis to estimate the efficiency of public accounting firms in the USA, the UK and Canada over the period 2008–2015. The ß- and σ- convergence tests are applied to analyze the dynamics of the efficiency gaps across firms and countries. Findings: The results show that market competition in the accounting sector increases efficiency. Gross domestic product growth also increases it while inflation decreases it. The analytical results indicate that the lagging public accounting firms are catching up to the leading public accounting firms within the same country, within the Big 4 group and within the non-Big 4 group. They also show that the non-Big 4 groups are catching up to the Big 4 group and that the countries with less efficient accounting firms are catching up to the country with the more efficient accounting firms. Originality/value: This study accounts explicitly for the effect of business environmental factors on public accounting firm efficiency. Furthermore, the research also adds to the literature by investigating the comparative dynamics of the efficiency gaps of public accounting firms.