Market forces at play: The impact of audit market concentration and firm market power on audit fees

Authors

  • Natasha Aritha Saphirra Indonesia Banking School, Jakarta, Indonesia
  • Wiwi Idawati Indonesia Banking School, Jakarta, Indonesia
  • Eddy Susanto Indonesia Banking School, Jakarta, Indonesia

DOI:

https://doi.org/10.24191/jeeir.v11i1.%2020988

Keywords:

Audit fees, Audit Market Concentration, Audit firm market power, Audit market structure, Indonesia

Abstract

The objective of this study is to examine the impact of Audit Market Concentration and Audit Firm Market Power on Audit Fees in non-financial firms listed on the Indonesia Stock Exchange between 2017 and 2020. The sample of 194 companies was chosen through purposive sampling. The independent variable, Audit Market Concentration, was measured using the Herfindahl Hirschman Index (HHI), and Audit Firm Market Power was measured using the absolute smallest difference in the market share value of an Audit Firm and its closest competitors. The market share was calculated using Audit Fee proxies that were summed based on the IDX Industrial Classification (IDX-IC). Our findings reveal that the market structure in Indonesia is a tight oligopoly, and the audit market conditions in the country are highly concentrated. Our results suggest that Audit Market Concentration has no effect on Audit Fees, while Audit Firm Market Power has a positive influence on Audit Fees.

Author Biographies

Natasha Aritha Saphirra, Indonesia Banking School, Jakarta, Indonesia

Natasha Aritha Saphirra, is a student under the supervision of Dr. Wiwi Idawati and Eddy Susanto, S.E., M.M. from Indonesia Banking School, and she is the main author for this research. Her research interest covers economics, accounting, and auditing. She can be contacted via email on natasha.20181211079@ibs.ac.id.

Wiwi Idawati, Indonesia Banking School, Jakarta, Indonesia

Wiwi Idawati, is an Associate Professor in the Department of Accounting at the Indonesia Banking School (ORCID: https://orcid.org/0000-0002-0242-8268). Her main research activity is in the area Accounting and Auditing. She has published widely on these subjects in publications such as International Journal of Economic Research and International Journal of Applied Business and Economic Research. She can be reached through her email at wiwi.idawati@ibs.ac.id.

Eddy Susanto, Indonesia Banking School, Jakarta, Indonesia

Eddy Susanto is a Senior Lecturer at Indonesia Banking School, Jakarta. His main research interests are economic, management and banking. He can be reached through his email at eddys110958@gmail.com.

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Published

2023-01-31

How to Cite

Saphirra, N. A., Idawati, W., & Susanto, E. (2023). Market forces at play: The impact of audit market concentration and firm market power on audit fees. Journal of Emerging Economies and Islamic Research, 11(1), 41–56. https://doi.org/10.24191/jeeir.v11i1. 20988

Issue

Vol. 11 No. 1 (2023): January 2023 Issue

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Articles

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Copyright (c) 2023 Natasha Aritha Saphirra, Wiwi Idawati, Eddy Susanto

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