Reputation and performance in large law firms

Reputation is a signalling device that serves as a proxy for the quality of a firm’s products, strategies and employees relative to its competitors, when communicating with clients and other stakeholders. It is especially important for professional service firms because of the complex and intangible nature of their service and because of the advantages it confers in the market for high-quality professional staff. This paper extends and refines existing research on reputation which shows positive returns to reputation for professional service firms. We use different rankings of the top 50 law firms in the UK to measure reputation and examine their relationship with financial performance as expressed in firm revenue and profits. We find positive but diminishing returns to reputation even within this group and we find a stronger relationship between reputation and profits than fee income. We conclude that reputation may be an important source of competitive advantage for leading firms but it seems to offer little leverage for others. If these results are generalizable across other professional sectors this raises the question of how the majority of firms can differentiate themselves.

New career models in UK professional service firms:from up-or-out to up-and-going-nowhere?

In this paper, we empirically examine how professional service firms are adapting their promotion and career models to new market and institutional pressures, without losing the benefits of the traditional up-or-out tournament. Based on an in-depth qualitative study of 10 large UK based law firms we find that most of these firms do not have a formal up-or-out policy but that the up-or-out rule operates in practice. We also find that most firms have introduced alternative roles and a novel career policy that offers a holistic learning and development deal to associates without any expectation that unsuccessful candidates for promotion to partner should quit the firm. While this policy and the new roles formally contradict the principle of up-or-out by creating permanent non-partner positions, in practice they coexist. We conclude that the motivational power of the up-or-out tournament remains intact, notwithstanding the changes to the internal labour market structure of these professional service firms.

The big 4 in Bangladesh:caught between the global and the local

Purpose- This article explores the work practices of Big 4 firms in Bangladesh with the aim of exploring the extent to which Global Professional Service Firms can be thought of as being genuinely ‘global’. Methodology/Approach- Interviews were undertaken with the vast majority of Big 4 partners in Bangladesh. These interviews explored a number of themes related to the professional service work context in Bangladesh and the relationship between local and global firms. Findings- The central finding of this paper is that although the Big 4 have a long-established presence in Bangladesh, local societal factors heavily influence the realities of work for accountants there. In most cases the Big 4 firms establish correspondent firms (instead of full member firms) in Bangladesh and tend to offer restricted service lines. Additionally, the paper identifies professional, commercial and cultural barriers to greater Big 4 involvement in the local market. Conceptually, the chief contribution of this paper is to explore how the effects of globalising capitalism and standardised ‘best practices’ in global professional service work are mediated through the societal effects of Bangladeshi society, resulting in the Big 4 having only a tentative presence in the Bangladeshi market. Research implications- The findings cast doubt on the extent to which self-styled Global Professional Service firms are truly ‘global’ in nature. Future work examining the Big 4, or accounting more generally, in the context of globalization, would do well to pay greater attention to the experience of professionals in emerging markets. Originality/Value- Whilst there has been much work looking at accounting and accountants in the context of globalization, this work has tended to privilege ‘core’ western empirical settings. Very little is known about Professional Service Firms in ‘peripheral’ or emerging markets. Furthermore, this study extends the application of the System, Society and Dominance framework by mapping the interactions and dynamics of these three sources of influence in the setting of PSFs.

Big 4 audit fee premiums for national and office-level industry leadership in the United Kingdom

The pricing of Big 4 industry leadership Is examined for a sample of U.K. publicly-listed companies, and adds to the evidence from the Australian and U.S. audit markets that city-specific industry leadership commands a fee premium. There is a significant fee premium for city-specific industry leaders relative to other Big 4 auditors, but no evidence that either the top-ranked or second-ranked firm nationally commands a fee premium relative to other Big 4 auditors, after controlling for city-level industry leadership. We also test for Big 4 fee premiums relative to non-Big 4 auditors and the U.K. data suggest a three-level hierarchy based on audit fee differentials: (1) Big 4 city-specific industry leaders have the largest fees; (2) other Big 4 auditors (noncity leaders) and second-tier national firms have comparable fees that are lower than Big 4 city leaders but larger than third-tier firms; and (3) third-tier accounting firms have the lowest fees.

Nations and organizations:a comparative study of English and Indian work-related attitudes and values in matched manufacturing firms

This thesis reports a cross-national study carried out in England and India in an attempt to clarify the association of certain cultural and non-cultural characteristics with people's work-related attitudes and values, and with the structure of their work organizations. Three perspectives are considered to be relevant to the objectives of the study. The contingency perspective suggests that a 'fit' between an organization's context and its structural arrangements will be fundamentally necessary for achieving success and survival. The political economy perspective argues for the determining role of the social and economic structures within which the organization operates. The culturalist perspective looks to cultural attitudes and values of organizational members for an explanation for their organization's structure. The empirical investigation was carried out in three stages in each of the two countries involved by means of surveys of cultural attitudes, work-related attitudes and organizational structures and systems. The cultural surveys suggested that Indian and English people were different from one another with regard to fear of, and respect and obedience to, their seniors, ability to cope with ambiguity, honesty, independence, expression of emotions, fatalism, reserve, and care for others; they were similar with regard to tolerance, friendliness, attitude to change, attitude to law, self-control and self-confidence, and attitude to social differentiation. The second stage of the study, involving the employees of fourteen organizations, found that the English ones perceived themselves to have more power at work, expressed more tolerance for ambiguity, and had different expectations from their job than did the Indian equivalents. The two samples were similar with respect to commitment to their company and trust in their colleagues. The findings also suggested that employees' occupations, education and age had some influences on their work-related attitudes. The final stage of the research was a study of structures, control systems, and reward and punishment policies of the same fourteen organizations which were matched almost completely on their contextual factors across the two countries. English and Indian organizations were found to be similar in terms of centralization, specialization, chief executive's span of control, height and management control strategies. English organizations, however, were far more formalized, spent more time on consultation and their managers delegated authority lower down the hierarchy than Indian organizations. The major finding of the study was the multiple association that cultural, national and contingency factors had with the structural characteristics of the organizations and with the work-related attitudes of their members. On the basis of this finding, a multi-perspective model for understanding organizational structures and systems is proposed in which the contributions made by contingency, political economy and cultural perspectives are recognized and incorporated.

Executive remuneration, financial performance and corporate governance in UK and Spanish listed firms

This study examines the relationship between executive directors’ remuneration and the financial performance and corporate governance arrangements of the UK and Spanish listed firms. These countries’ corporate governance framework has been shaped by differences in legal origin, culture and backgrounds. For example, the UK legal arrangements can be defined as to be constituted in common-law, whereas for Spanish firms, the legal arrangement is based on civil law. We estimate both static and dynamic regression models to test our hypotheses and we estimate our regression using Ordinary Least Squares (OLS) and the Generalised Method of Moments (GMM). Estimated results for both countries show that directors’ remuneration levels are positively related with measures of firm value and financial performance. This means that remuneration levels do not lead to a point whereby firm value is reduced due to excessive remuneration. These results hold for our long-run estimates. That is, estimates based on panel cointegration and panel error correction. Measures of corporate governance also impacts on the level of executive pay. Our results have important implications for existing corporate governance arrangements and how the interests of stakeholders are protected. For example, long-run results suggest that directors’ remuneration adjusts in a way to capture variation in financial performance