An empirical investigation of price competition and industry specialisation in NHS audit services

The NHS audit market is regulated by the Audit Commission (AC) and has unique features. We develop a model for audit fees that includes rigorous analysis of the type of auditor. Poor financial standing does not give rise to higher audit fees. Despite regulation the study supports the existence of a Big Five price premium on the audit fee, but only one firm has a premium. We found no premium due to industry specialisation. The removal of performance audit from AC regulation will require improved audit fee reporting and control.

Non-competition covenants in acquisition deals

We study the changes in the consumers’ and producers’ surplus associated with acquisition deals where there is a non-competition covenant that forbids the seller from re-entering the market over a given time period. We find that these cquisition deals can lead to significant negative (positive) changes in the producers’ consumers’) surplus, which decrease significantly with the time period of the covenant. We also show that the effect of the time period of the covenant on the welfare change can be positive or negative. It depends largely on the market conditions, such as the profit uncertainty and growth rate.