2015-13 Sakshi Girdhar PhD Thesis The Internationalization of Big Accounting Firms and the Implications on their Practices and Structures: An Institutional Analysis DEPARTMENT OF ECONOMICS AND BUSINESS AARHUS UNIVERSITY DENMARK THE INTERNATIONALIZATION OF BIG ACCOUNTING FIRMS AND THE IMPLICATIONS ON THEIR PRACTICES AND STRUCTURES: AN INSTITUTIONAL ANALYSIS By Sakshi Girdhar A PhD thesis submitted to School of Business and Social Sciences, Aarhus University, in partial fulfilment of the requirements of the PhD degree in Economics and Business May 2015 PREFACE During the period of March 2012 to February 2015, I embarked upon a journey of learning and discovery. As wise men proclaim, “It is the journey that matters the most, not the destination”. And as this journey is coming to an end, I should not forget all the experiences and people that made it possible. Foremost, I am grateful for the financial support provided by Department of Economics and Business, Aarhus University, which made it possible for me to travel abroad for seminars and to gather data for my research. Special thanks go to all the participants of my study for making this research possible. While, several people contributed to this research, I would like to first thank my main supervisor Kim Klarskov Jeppesen at Department of Accounting and Auditing, Copenhagen Business School (CBS), Denmark, for offering invaluable guidance and also for supporting me by co-authoring my first paper. I truly value and admire the patience that he has shown whenever I would approach him with a new idea or, more often, a new question or problem. He has always been encouraging and motivating. Of course, my project is to a large extent built upon the great foundation provided to me by Department of Accounting and Auditing at CBS. The academic and administrative support that I received at CBS was first-class and ensured that I could focus more on my project and less on the administrative challenges, which were skilfully tackled on my behalf by the CBS administration. My stay at CBS was so much more hospitable thanks to Carsten Krogholt Hansen. I would also like to thank all my dear colleagues and fellow department members who made me feel comfortable during my stay at CBS. Nothing can replace the importance of the numerous sparring sessions and insightful discussions that I had with my fellow PhD students who helped me make my research snappier. This research project gave me an opportunity to visit different universities and experience great learning environments of which one of the prime ones was Fisher School of Accounting, ii University of Florida, USA. I wish to express my gratitude to Stephen K. Asare and W. Robert Knechel for hosting my stay and providing me with opportunities to attend some interesting seminars and participate in an excellent research environment. Also, I would like to thank all the PhD fellows at Fisher School of Accounting for creating a fun environment at work and for insightful discussions. A lot of my questions and concerns during the research process were addressed by Peter Skærbæk and Leif Christensen who not only dealt with them patiently but also spent time to provide me with the best answers. I would like to express my gratitude to Mark Christensen who provided me with instrumental feedback on my first paper. I also wish to thank Bo Sandemann Rasmussen, Hans Frimor and Jan Bentzen for their constant guidance and support throughout my studies. To make sure that my thesis is authentic and proofread; a few dedicated and helpful colleagues took out the time and effort: Richard Pucci, Berit Hansen, Annette Mortensen and Thomas Stephansen. I would also like to thank Kim Pettersson and Pernilla Rørsø for providing housing support in Copenhagen. Last and certainly not the least, I would like to offer/express my gratitude and respect to my friends and family whose unwavering and constant support kept me afloat during tough times and kept me going when it mattered the most. Without them, I wouldn’t be here. Sakshi Girdhar February 2015 iii UPDATED PREFACE The pre-defense took place on March 27th, 2015. I am very grateful to the member of the assessment committee Thomas Riise Johansen from Copenhagen Business School, Breda Sweeney from National University of Ireland Galway and Rainer Lueg (chair) Aarhus University for their careful reading of my dissertation and providing constructive comments and suggestions. Most of the comments have been incorporated in the current version of the dissertation, while others remain for the future. Sakshi Girdhar May 2015 iv Table of Contents PREFACE ..................................................................................................................................................................... II LIST OF TABLES ......................................................................................................................................................... VII LIST OF FIGURES ...................................................................................................................................................... VIII 1 SUMMARY ......................................................................................................................................................... 1 1.1 BACKGROUND AND STRUCTURE OF THE THESIS ................................................................................................................ 1 1.2 BRIEF OVERVIEW OF THE ARTICLES ............................................................................................................................... 3 1.2.1 Article 1: Institutionalization and practice variation in the transparency reports of big accounting firms 3 1.2.2 Article 2: The shift in audit partner competencies and threat for audit quality: insights from the big accounting firms in Denmark .................................................................................................................................... 6 1.2.3 Article 3: Up, up and away? The transformation of organizational structure in the big 3 accounting firms in Denmark .............................................................................................................................................................. 10 2 DANISH SUMMARY (DANSK RESUMÉ) ..............................................................................................................15 3 INSTITUTIONALIZATION AND PRACTICE VARIATION IN THE TRANSPARENCY REPORTS OF BIG ACCOUNTING FIRMS ........................................................................................................................................................................18 3.1 ABSTRACT .............................................................................................................................................................. 18 3.2 INTRODUCTION ....................................................................................................................................................... 19 3.3 LITERATURE REVIEW ................................................................................................................................................ 22 3.4 RESEARCH DESIGN AND METHODOLOGY ...................................................................................................................... 29 3.5 FINDINGS ............................................................................................................................................................... 32 3.6 DISCUSSION AND CONCLUSION ................................................................................................................................... 42 4 THE SHIFT IN AUDIT PARTNER COMPETENCIES AND THREAT FOR AUDIT QUALITY: INSIGHTS FROM THE BIG ACCOUNTING FIRMS IN DENMARK ............................................................................................................................46 4.1 ABSTRACT .............................................................................................................................................................. 46 4.2 INTRODUCTION ....................................................................................................................................................... 47 4.3 LITERATURE REVIEW ................................................................................................................................................ 50 4.4 RESEARCH METHODOLOGY ....................................................................................................................................... 54 v 4.5 FINDINGS ............................................................................................................................................................... 56 4.5.1 Factors enabling institutional entrepreneurship in Denmark ................................................................... 56 4.5.2 Shifts in required competencies ................................................................................................................ 60 4.5.3 Perceived threats for audit quality due to shifts in competencies ............................................................ 67 4.6 DISCUSSION AND CONCLUSION .................................................................................................................................. 70 5 UP, UP AND AWAY? THE TRANSFORMATION OF ORGANIZATIONAL STRUCTURE IN THE BIG ACCOUNTING FIRMS IN DENMARK ..................................................................................................................................................75