The Importance of Client Size in the Estimation of the Big 4 Effect: A Comment on DeFond, Erkens, and Zhang (2016)
Management Science, Forthcoming
7 Pages Posted: 23 Jun 2016 Last revised: 19 Sep 2016
Date Written: April 18, 2016
DeFond, Erkens, and Zhang (2016, hereafter DEZ) provide comprehensive analyses highlighting how random variations in propensity score matching (PSM) design choices affect inferences concerning the existence of the Big 4 auditor effect. The conclusion of DEZ is that Lawrence, Minutti-Meza, and Zhang (2011, hereafter LMZ) fail to find a Big 4 effect because of PSM’s sensitivity to design choices. We believe that DEZ emphasizes the need to think carefully when implementing PSM. We offer our views on DEZ findings and suggestions for future research.
Keywords: Big 4 Effect; Client Size
Suggested Citation: Suggested Citation