Structure and Nature of Competition in the Market for Financial Audit Services in Mexico

Abstract

The structural paradigm emphasizes that the nature of competition in a market, is closely related to the structure of the market and in particular its level of concentration. The objective of this research work is to present empirical evidence on the structure and nature of competition in the market for financial audit services in Mexico during the period from 2000 to year 2007. To do this, we have calculated several measures of concentration, using a sample of 1,344 financial audit reports of companies that are registered as issuers of shares in the capital market of the Stock Exchange in Mexico. The results show that the market for financial audit market in Mexico is highly concentrated and under the control of a few audit firms, specifically of Large International Firms, better known in the field business around the world as the “Big 4”. Also the results show that the nature of the competition in the market for financial audit services in Mexico is that, in imperfect markets, known as an oligopoly.