Studies show that incumbents reduce prices in response to higher entry threats in consumer industries. We provide new insights on the importance of an incumbent firm's reputation to the limit-pricing decision by examining a professional service industry where the supplier's reputation serves as an existing barrier. The recent staggered passage of mergers of three Canadian accounting certification bodies exogenously increases the probability of future entry to incumbent audit firms. Employing difference-in-differences analyses and a strict fixed-effects structure (client-firm, audit-firm, province and year-month fixed effects), we find that incumbent audit firms reduce audit fees in response to a higher entry threat induced by the merger. The microstructure of the audit industry provides further insights—non-Big-4 audit firms reduce fees after the merger, while Big-4 audit firms can withstand higher entry threats and do not adjust fees.

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审计行业的战略进入威慑：来自专业会计机构合并的证据

研究表明，现有企业降低价格以应对消费行业更高的进入威胁。我们通过研究供应商的声誉作为现有障碍的专业服务行业，就现有公司的声誉对限制定价决策的重要性提供了新的见解。最近三个加拿大会计认证机构的合并交错通过外生增加了未来进入现任审计公司的可能性。采用差异分析和严格的固定效应结构（客户-公司、审计-公司、省份和年月固定效应），我们发现现有审计公司降低审计费用以应对更高的进入威胁合并引起的。审计行业的微观结构提供了进一步的见解——非四大会计师事务所在合并后降低了费用，而四大会计师事务所可以承受更高的进入威胁而不调整费用。