This paper investigates the effect of a China’s government policy, which forces a public accounting firm to expand its production scale, on firms’ technical efficiency and economies of scale. We apply and estimate a standard input distance frontier using data on the top 100 Chinese accounting firms covering 2008-2009. We find that the larger the firm size is, the more technically efficient it is, thus justifying policy enforcement. Furthermore, economies of scale prevail in the top 100 accounting firms and are not exhausted, supporting that these firms keep extending their production scale to reduce their long-run average costs. Empirical results reveal that larger accounting firms have more competitive advantage.
International Journal of Information and Management Sciences 26(4), p.361-378