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Essays on the competitive effects of bundling audit and non-audit services.
Book - Dissertation
After the financial crisis, regulators worldwide questioned the structure of the audit market and the provision of non-audit services by audit firms. Audit firms have been blamed for their contribution to the financial crisis and regulators increased auditor regulation to enhance audit market competition as well as improve audit quality. In this project, we investigate the effect of bundling on entry in the audit market and competition within the audit market. Due to switching costs rivalry between the existing firms and potential entrants is reduced because customers continue purchasing from the firm from which they purchased in the previous period, even if another firm sells identical products (Beggs and Klemperer, 1992). As a result, when a significant proportion of the customers in a market is "locked-in" to their current supplier, it makes the market unattractive for potential new entrants.