PricewaterhouseCoopers Research Articles

Merger Momentum Abates

The slothlike economic recovery did not turn the chemical industry away from deal-making in 2011, but as the year wore on and business uncertainty increased, fewer firms reached out for megadeals. The number of acquisitions announced in 2011 was slightly ahead of the number in 2010, nudging up to 114 from 112. But total deal value for the year dipped sharply by 28% compared with 2010. Overall deal value was a healthy $43.2 billion in the first quarter, but by the fourth quarter it had sunk to $7.5 billion. In general, chemical companies have strong balance sheets and are motivated to use them to grow through acquisition, analysts say. Early in 2011, executives surveyed by PricewaterhouseCoopers (PwC) said they were feeling positive about the economy. But in the second half, “though they were not pessimistic, they were concerned; they expressed a guarded outlook,” says Tracey A. Stover, global chemicals leader ...

Mobility or Lack Thereof

I remember quite clearly what life was like before the now-ubiquitous Internet, mobile phone, and iPad. Information transfer moved at a far more leisurely pace, accompanied by a curious absence of beeping, tweeting, and pinging. There was time to absorb, collate, and ration data. Information was hard to get, and therefore valuable.If your ankle ligament snapped, you would have had to head to emergency or make an old-fashioned doctor's appointment for information and treatment. A predictable sequence of tests and check-ups would then proceed at snail's pace. For more information, you could limp to the library and physically find a journal or book on the topic.Recently facing that very scenario, I was able to instant message my doctor, who called from her smartphone to give me instructions (ice, elevation, no walking) and arrange for an immediate X-ray. One day later, radiology e-mailed her and texted me that there were no broken bones. I then did a quick web search— via a mobile medical app—on nonfunctioning ligaments and what to do about them.Without registering it, I was ankle-deep in the flexible, easy access, data-rich world of mobile health. Mobility in this field means that event-driven patient care can occur in real time, and data can be routed immediately to the appropriate user, whether that is the clinician, hospital staff, patient, or patient's family. However, does this necessarily mean better patient care and improved outcomes?Big business certainly thinks so. Industry analysts at GlobalData estimate that the global mHealth market will reach $11.8 billion by 2018, an estimated 900% increase over seven years. With nearly 85% of people on Earth currently owning mobile phones according to Pricewaterhouse Coopers, and over 18,000 health apps on Apple's app store alone, it is safe to say that the mHealth revolution is already well underway.But how are healthcare organizations implementing and adapting to the new technologies and increased mobility? How are security of information delivery, access, and patient quality of care affected? In this issue of Horizons, the challenges and opportunities presented by mHealth are discussed from a broad range of perspectives, including manufacturing, regulatory, clinical, and healthcare technology management.From an expert's discussion of what it will take to harness the mobile revolution and improve patient care, to articles on mHealth interoperability, security and compliance, device design, and the latest apps and wearable devices, this issue offers a comprehensive look at mHealth today and a glimpse into the future of mHealth.As I was writing this, the irony of being immobile while finalizing an issue on mobile health was not lost on me. Fortunately, thanks to having all of humanity's shared knowledge at my fingertips, my immobility turned out to be not only bearable, but also downright informative.

The Effect Of Auditor Independence On International Capital Markets For eCommerce Firms

<p class="MsoBlockText" style="margin: 0in 0.5in 0pt;"><span style="font-style: normal; mso-bidi-font-style: italic;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">According to the efficient market hypothesis, the market for securities can be described as efficient if the market reflects all available information and reacts quickly to new information (Schroeder and Clark 1998).<span style="mso-spacerun: yes;">  </span>Investors depend on financial statements to help them judge opportunities, risks, and investment alternatives (Revsine, Collins and Johnson 1999).<span style="mso-spacerun: yes;">  </span>This information must be verified by independent sources such as auditors.<span style="mso-spacerun: yes;">  </span>The relationship between auditor and stockholder is based on agency theory (Schroeder and Clark 1998), where the agent (auditor) has a fiduciary relationship with the principle (stockholders).<span style="mso-spacerun: yes;">  </span>Any loss of faith in auditor independence by investors will seriously affect the information value of financial statements.</span></span></span></p><p class="MsoBodyText2" style="margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic; mso-bidi-font-size: 12.0pt;"><span style="font-family: Times New Roman;"> </span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic; mso-bidi-font-size: 12.0pt;"><span style="font-family: Times New Roman;">Auditor independence rules must be easy to understand and rigorously enforced or the public's confidence in financial statements will erode.<span style="mso-spacerun: yes;">  </span>This paper will specifically assess the difficulties encountered by large accounting firms such as PriceWaterhouseCoopers (PWC) and Arthur Andersen<span style="mso-spacerun: yes;">  </span>in their efforts to remain independent with respect to their e-commerce clients.<span style="mso-spacerun: yes;">  </span>Many e-commerce companies have innovative and untested business models as well as inexperienced and untraditional business managers.<span style="mso-spacerun: yes;">  </span>Some auditors fail to measure the risk associated with these intangible, knowledge-based attributes.<span style="mso-spacerun: yes;">  </span>In addition, auditor independence may be blurred by the promise of lucrative consulting contracts.<span style="mso-spacerun: yes;">  </span>According to Arthur Levitt, the Chair of the SEC in 1999:</span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic; mso-bidi-font-size: 12.0pt;"><span style="font-family: Times New Roman;"> </span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic; mso-bidi-font-size: 12.0pt;"><span style="font-family: Times New Roman;">“The dynamic nature of today’s capital markets creates issues that increasingly move beyond the bright line of black and white.<span style="mso-spacerun: yes;">  </span>New industries, spurred by new services and new technologies, are creating new questions and challenges that must be addressed.<span style="mso-spacerun: yes;">  </span>Today, we are witnessing a broad shift from an industrial economy to a more service based one; a shift from bricks and mortar to technology and knowledge.” (Levitt 1999)</span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic; mso-bidi-font-size: 12.0pt;"><span style="font-family: Times New Roman;"> </span></span></p><p class="MsoBodyText2" style="margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic; mso-bidi-font-size: 12.0pt;"><span style="font-family: Times New Roman;">The objective of this paper is to review current independence rules, assess the difficulty in maintaining independence in the current e-commerce environment, and to make suggestions for improving independence rules.<span style="mso-spacerun: yes;">  </span>In addition, investigations conducted by the Securities and Exchange Commission (SEC) and new legislation such as the Sarbanes-Oxley Act will be reviewed as possible solutions to the problem.</span></span></p>

The politics of carbon disclosure as climate governance

The rapid growth in carbon disclosure in recent years represents a major success in the struggle to build awareness and action on climate change. Despite the Copenhagen debacle and Congressional inaction in the US, the measurement and reporting of carbon emissions at the product, facility and organization levels display considerable momentum. The growth of carbon disclosure is the result of three core drivers: regulatory compliance, pressure from non-governmental organizations (NGOs) and managerial information systems intended to facilitate participation in carbon markets, reduce energy costs and manage reputational risks. In this essay, we argue that the strategies pursued by 'institutional entrepreneurs' have played a key role in the successful institutionalization of carbon disclosure by bringing together companies, NGOs and government agencies. The Carbon Disclosure Project (CDP), in particular, has displayed strategic skill in presenting the project in ways that appeal to multiple stakeholders and building broad legitimacy for reporting standards. Some 3000 organizations in 66 countries around the world now measure and disclose their emissions and climate strategies through CDP (Price Waterhouse Coopers, 2010). Carbon disclosure has become an important institution of governance, raising awareness about climate change, clean energy and energy efficiency, while generating legitimacy for the principle of external accountability. Most importantly, the rise of voluntary carbon disclosure has demonstrated to business the feasibility and potential benefits of carbon measurement and reporting, such as management of reputation and energy costs. In turn, this has opened political space for regulatory initiatives that mandate disclosure and formalize carbon accounting standards. Despite the rapid uptake of carbon disclosure, there are some troubling questions about the trajectory along which the institution is evolving and its ultimate impact. Tensions exist between two 'institutional logics', a corporate logic of carbon risk management and carbon trading, and an NGO-oriented logic based on transparency and accountability. We argue that the field is drifting toward a more corporate logic, and that while this enhances the diffusion of disclosure, it also weakens it as a tool for driving the substantial cuts in greenhouse gas (GHG) emissions needed to address climate change. Our analysis also highlights that building new institutions requires not just discursive strategies to frame issues in a particular way, but also political and economic strategies

Genome-Wide Analysis of Genetic Alterations In Acute Myeloid Leukaemia (Massively parallel, high-throughput, paired-end DNA sequencing and genotyping of an AML genome).

AbstractAbstract 1690 Background –Acute Myeloid Leukaemia (AML) has a worldwide incidence of approximately 3.5 per 100,000 population per year with most cases occurring in adults. Survival at 12 months is less than 30% and at 5 years is less than 10% (NCI, 2010). AML is a complex disease that demonstrates marked heterogeneity morphologically, cytogenetically and molecularly. The largest cytogenetic subgroup of AML has normal cytogenetics and accounts for approximately 45% of de novo AML cases. Furthermore, the response to treatment and survival outcomes of cytogenetically normal AML (cn-AML) is remarkably heterogeneous. Aims –– To undertake whole-genome and exome sequence analysis of a cn-AML case at diagnosis and at relapse to identify subtle, potentially oncogenic mutations at the molecular level that may initiate AML and those that may be responsible for drug resistance or relapse. Specific Aims:i. –Comparison of the AML genomes at diagnosis, remission and relapse to identify genomic regions with changes in copy number and loss of heterozygosity, using single nucleotide polymorphism (SNP) microarray analysis. ii. Identify chromosomal rearrangements such as small insertions, duplications, inversions and deletions, (“indels”) and translocations that may contribute to AML initiation or relapse, using massively parallel, ultra-high throughput (“next generation”), paired-end sequencing of total genomic DNA at low depth. iii. Identify DNA point mutations potentially affecting protein function that may contribute to AML initiation or relapse by using next generation sequencing at high depth of the captured exomes (putative coding regions) of the AML and control genomes. Methods –The PwC (Price-Waterhouse-Coopers) Leukaemia and Lymphoma Tissue Bank, a joint initiative of the Australasian Leukaemia and Lymphoma Group and the Leukaemia Foundation, provided samples from an AML patient with normal cytogenetics and a blast count at diagnosis of 70% and at relapse of 85%. Genomic DNA extracted from autologous mesenchymal stem/stromal cells (MSCs) was used to represent non-leukaemic, germline, control DNA. Primary cell culture of MSCs from cryopreserved bone marrow aspirate cells (50 × 106) of our test patient at remission was achieved with standard tissue culture methods. High molecular weight DNA was extracted from the patient's MSCs and marrow cells at diagnosis, remission and relapse samples. Sonication (Covaris) and libraries appropriate for paired-end high-throughput sequencing (Illumina Genome Analyzer II instrument) were prepared from gel purified DNA fragments approximately 200 bp in size. Results and Discussion –Primary cell culture of MSCs from bone marrow aspirates proved to be a robust source of germline genomic DNA with several advantages over skin. Firstly, tissue banked samples, will not include biopsies of normal skin. Furthermore, skin can be contaminated by circulating leukaemic cells, which is problematic with low-depth genomic sequencing. The homogenous immunophenotype of the cultured MSCs indicate their purity. Preliminary SNP microarray analysis identified a large region of uniparental disomy (copy number neutral loss of heterozygosity) involving most of chromosome 13q, which was not identified by standard cytogenetic analysis. Low-pass or shallow paired-end genomic DNA sequencing has generated the following outputs. MSC genome: 10.7 Gb (3.6X haploid genome coverage) resulting from 152 × 106 paired sequence reads, AML_diagnosis genome: 21.6 Gb (7.2X) resulting from 142 × 106 paired sequence reads, AML_relapse genome: 26.8 Gb (8.9X) resulting from 177 × 106 paired sequence reads. The capture baits representing the human exome span 26,225,870 bp (approximately 0.9% of haploid human genome). Exome capture libraries were prepared from the three sources of DNA (MSC, AML_diagnosis and AML_relapse) and sequenced using a single lane for each library. The outputs for all three were very similar, approximately 23 × 106 paired sequence reads, representing 1.3 Gb (49X haploid exome coverage). The reads for whole genome or exome capture were of high quality and more than 98% could be unambiguously aligned to the human reference genome in the correct orientation and interval distance. Here we will present MSC enrichment results and sequencing output results, quality control and preliminary analysis of genomic alterations and exonic mutations. Disclosures:No relevant conflicts of interest to declare.

Embedding security: when technology is no longer enough

In reviewing the recent enforcement action taken by regulators, such as the UK's Information Commissioner's Office (ICO), it becomes plain that simply implementing security technology – or even policies for that matter – is no longer enough. Cath Everett explores how organisations can go about embedding security into the corporate culture. She explores the idea that neither technology nor security policies in and of themselves are enough, but must be backed up with an effective awareness campaign and sound processes and procedures. She also examines how one organisation, Bupa UK, went about doing just that. In reviewing the recent enforcement action taken by regulators, such as the UK's Information Commissioner's Office (ICO), it becomes evident that simply implementing security technology – or even policies for that matter – is no longer enough. Instead, the focus has shifted to training staff in appropriate data-handling techniques to try and ensure that a given data breach does not happen again. This stance was also backed up by management consultancy PricewaterhouseCoopers (PwC) in its June report entitled ‘Protecting your Business’.1

ECONOMY BUOYS CHEMICAL DEALS

THE IMPROVING ECONOMY is boding well for chemical industry mergers and acquisitions (M&A). The number of announced deals priced at more than $50 million in the first half of 2010 was up 45% compared with the same period in 2009, according to a recent survey by Price-waterhouseCoopers (PwC), an audit, tax, and advisory services firm. The combined value of the 45 agreements announced was $28 billion, compared with $18 billion for 31 deals in the first half of 2009. Among the major deals announced this year are BASF’s $3.8 billion purchase of Cognis and a more than $7 billion takeover attempt of Airgas by Air Products & Chemicals. The number of large deals actually completed in the first six months of 2010 was 32, which was greater than all those finalized in 2009, reports investment banking firm Young & Partners. “The M&A market has picked up significantly, and we clearly are headed for an ...

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An analysis of audit fee premiums of the merged audit firm in Malaysia

After the Big 6 merger exercise in 1998, PriceWaterhouseCoopers (PWC) has become the industry market leader that provides high quality audit services. Consequently, it has acquired a greater capacity to develop expertise and provide better quality audit services. It is expected that PWC charges fee premiums in return on investment for the capacity building. This study investigates how audit fee (AF) premiums and how it relates to auditors' industry specialisation and reputation. The study utilises data of 679 Bursa Malaysia listed companies in 2001 and 796 in 2005. AF premiums are calculated using the Simunic (1980) AF model. Industry specialisation is determined based on the number of audit clients at 20% threshold. Results indicate PWC obtains highest average AFs, hence, maintains its industry leadership. Results show that PWC does not charge AF premiums over and above the amount charged by the Big 5/4 regardless of whether they are industry specialists or not, except on smaller clients.

Independent sector treatment centres: the first independent evaluation, a Scottish case study

The pound5 billion English Independent Sector Treatment Centre (ISTC) programme remains unevaluated because of a lack of published contract data and poor quality data returns. Scotland has a three-year pilot ISTC, the Scottish Regional Treatment Centre (SRTC), the contract for which is now in the public domain. This study aims to conduct an independent evaluation of the performance of the SRTC during the first year of operation. A retrospective analysis of the SRTC comparing activity as reported by hospital episode statistics returned to ISD Scotland with: volume and cost data in the SRTC contract; a 10-month audit carried out by management consultants Price Waterhouse Coopers (PWC); and an internal NHS Tayside performance report. All day-case and inpatient activity at the SRTC from 1 December 2006 to 31 January 2008. Activity and cost. The annual contract was based on patient referrals to the SRTC and not actual treatments. The contract was awarded on the basis of 2624 referrals a year, total value of pound5,667,464. According to ISD data, the SRTC performed 831 procedures (32% of annual contract) in the first 13 months worth pound1,035,603 (18%). PWC's figures report 2200 referrals (84%) to the SRTC at a cost of 2,642,000 (47%) in the first 10 months. Basing the SRTC contract on payments for referrals rather than actual treatment represents a major departure from normal standards of reporting and commissioning and may have resulted in over-payment for referrals for patients who did not receive treatment of up to pound3 million in the first 10 months. The PWC report falls well below the standards one would expect of an independent evaluation and we were unable to validate PWC's analysis and the claim of value for money. If wave-one ISTCs in England perform similarly to the SRTC then as much as pound927 million may have been paid for patients who did not receive treatment. We recommend a moratorium on all ISTC contracts until the contracts have been published and properly evaluated with respect to work paid for and actual work carried out and quality of care.

The External Auditor’s Role in Bank Regulation and Supervision: A Comparative Analysis Between the UK, Germany, Italy and the US (Second/Old Edition)

Up until 1989, there existed “the Big Eight” accountancy firms namely the eight major international accountancy firms, Arthur Young (AY), Ernst & Whinney (EW), Deloitte Haskins & Sells (DHS) ,Touche Ross (TR), Price Waterhouse, Coopers and Lybrand, Arthur Andersen and KPMG. At present, there remain only four; these four comprise of Ernst & Young, Deloitte & Touche, Pricewaterhouse Coopers and KPMG. Four of the Big Eight accounting firms merged to create two firms in 1989. The four firms consisted of Arthur Young (AY) and Ernst & Whinney (EW), which merged to form Ernst & Young (EY), and Deloitte Haskins & Sells (DHS) and Touche Ross (TR), which merged to form Deloitte & Touche (DT). This resulted in the “Big Six”. The merger between Price Waterhouse and Coopers & Lybrand which resulted in Pricewaterhouse Coopers and the Enron debacle which lead to Arthur Andersen being made defunct have resulted in the “the Big Four”. Whilst the existence of the present “Big Four” that is, Pricewaterhouse Coopers, KPMG, Ernst & Young and Deloitte & Touche, occurred mainly as a result of mergers between these accountancy firms, the demise of Arthur Andersen, its role in the collapse of Enron, and the devastating effects on so many lives, cannot be ignored.This publication considers through a comparative analysis of selected jurisdictions, how the external auditor can assist regulators in carrying out their regulatory and supervisory functions. It also considers how regulators could implement their supervisory and enforcement tools in addressing the issue of audit liability.

Elucidating the aesthetic and operational characteristics of UK boutique hotels

PurposeThe paper seeks to clarify the aesthetic and operational characteristics of UK boutique hotels so as to obtain a clearer definition of boutique hotels.Design/methodology/approachSince an official list of boutique hotels is not available, the study looked at 15 consortia recognised as operating bona fide boutique hotels by a few authoritative sources (e.g. Pricewaterhouse Coopers, the RAC). Web sites of each boutique hotel were scrutinised by content analysing vital operational characteristics and aesthetic features that were presented. A comparative analysis was then carried out with the findings and interviews obtained from four boutique hotel managers to establish the common characteristics of boutique hotels.FindingsThe paper describes the aesthetics and operational characteristics of UK boutique hotels, indicating what can be found in a boutique hotel. One of the many important findings of this study suggests that the majority of boutique hotels are not privately owned, contradicting previous studies.Research limitations/implicationsThe list of characteristics is not exhaustive, although the interest in UK boutique hotels is rather recent. The research method used in this study has not been used before, and it is therefore recommended that research on consumer perceptions of boutique hotels should help to augment and balance the findings of this study.Practical implicationsA meaningful and functional definition of boutique hotels will enable trade bodies and relevant associations to revise their grading systems, better serving the hotel industry, as well as business and leisure travellers.Originality/valueThis paper aims to give credibility to the sector so that not any hotel can claim to be boutique, as specific characteristics have to be fulfilled.

Regional Patterns of Venture Capital Financing in the US

This paper analyses the development of venture capital financing in the US covering a time period from the beginning of 1995 until 2008 (third quarter). Its focus is the structural changes emerging from reallocation of financial resources over time with special emphasis on regional allocation based on quarterly data collected by the National Venture Capital Association (NVCA) and Price WaterhouseCoopers as the MoneyTree dataset. Taking into account the multiple dimensions offered by stages of venture financing cycle, direction of industries, and regional allocation together with the overall business cycle patterns one key finding is a fairly steady concentration process of US venture capital financing in two key destinations as the Silicon Valley and New England. This trend even prevails with a significant shift from ICT related research industry areas towards biotechnology, health and energy over the respective time period. Furthermore after the burst of the new economy bubble in particular start-up/seed early stage financing lost in importance measured by their respective shares in favour of financing for expansion and later stage financing. This indicates an increasing risk averseness in venture capital financing which might be attributed to the high degree of uncertainty of early stages.

Non‐Audit Fees, Market Leaders and Concentration in the German Audit Market: A Descriptive Analysis

This is the first study to analyze auditors’ market shares and concentration in Germany on the basis of audit fees, which have been subject to disclosure since 2005. Previous studies have all used surrogates to measure concentration, and were therefore unable to distinguish between non‐audit and audit fees. We have at our disposal the data from 175 audits (including three joint audits) and 40 audit firms. These data show that the Big4 obtained 87% of the total audit fees and 90% of the total fees in the period under investigation. PricewaterhouseCoopers (PwC) is the market leader, based on both the total fees and the audit fees. KPMG earns the most in the sub‐market for tax consultancy. The non‐audit fees amount to 41.9% of the total fees. Audit firms specialize in certain industries or stock market segments. Market concentration increases over time. At present, concentration seems to be higher in Switzerland, although it is lower in the United States of America (USA) and the United Kingdom (UK).

SURVEY Market challenges dim the confidence of the world's chemical CEOs

Chief executive officers of the world's chemical companies are less confident about the next 12 months than are their counterparts in industry as a whole. According to a survey just released by the tax and advisory services firm PricewaterhouseCoopers (PwC), only 44% of chemical CEOs are very confident about the next 12 months, compared with 52% of CEOs in general. Moreover, only 36% of chemical CEOs are more confident than they were a year ago, compared with 50% of CEOs in general. PwC surveyed nearly 1,100 36 of whom lead chemical companies. The main drains on chemical CEOs' confidence, PwC reports, are low-cost competition, energy prices, energy security, and overregulation. It is not surprising to see that regulation is concerning chemical CEOs, says Volker Fitzner, global chemicals advisory leader at PwC. He notes that REACH—Europe's new system for the registration, evaluation, and authorization of chemicals—will have a considerable impact on manufacturers in Europe ...

The determinants of capital inflows: Does opacity of recipient country explain the flows?

This paper examines the relationship between international capital flows and the opacity of recipient countries. We use the Price Waterhouse Coopers (PWC) [Price Waterhouse Coopers, 2001. The Opacity Index: A Project of the Price Waterhouse Coopers Endowment for the Study of Transparency and Sustainability] opacity index for the year 2000 and investigate its influence on three types of net international capital flows: foreign direct investment, portfolio capital and international bank lending. We find support for higher opacity leading to a reduction in capital inflows, in general. More interestingly, however, in some cases we find counterintuitive results of more capital flows when opacity relating to specific business climate increases—accounting and regulations for foreign direct investment flows, corruption and regulation for portfolio flows, and corruption and economic opacities for international lending flows. This may be because of potentially higher profit opportunities that may be present due to the greater role unofficial channels of investment practices play as these opacity indices rise. Also, we find international bank lending, in general, responded very differently from foreign direct investment and portfolio flows.

Effects of the PricewaterhouseCoopers merger on the UK audit services market

PurposeThis paper seeks to investigate the effect of the PricewaterhouseCoopers (PwC) merger on the market for audit services in the UK. To this end a “what if” analysis is conducted comparing estimated outcomes prior to the merger with those expected under post‐merger conditions. Particular attention is given to the effect of the merger on the relative performance of the top tier and non‐top tier audit firms.Design/methodology/approachThe paper employs a Markov chain model to estimate the long‐term market shares of audit firms' pre‐merger and post‐merger. Concurrently, an optimisation model is employed to generate parameters reflecting the relative attractiveness of audit firms and the probability that a client company continues with the current audit firm.FindingsPrior to the PwC merger, this model would predict a large reduction in the share of the non‐Big Six from 17 per cent to a long run 7 per cent. However, the effect of the PwC merger appears to be that the position of the non‐Big Five has been improved and the model predicts a slight increase in long‐term market share to 18 per cent.Research limitations/implicationsThe Markov model employed makes a number of assumptions that may restrict the generality of the implications that can be drawn from the analysis.Practical implicationsThe results show that, contrary to the worries of the competition authorities, the long‐term impact of the PwC merger, ceteris paribus, would be to improve the position of the non‐top tier of auditing firms.Originality/valueAuditor concentrations studies have been mostly descriptive. This paper reports an analytical study of the potential effect of audit mergers on market concentration.

Of Arts, Leadership, Management Education, and Management Research: A Commentary on Nancy Adler's “The Arts & Leadership: Now That We Can Do Anything, What Will We Do?”

Nancy Adler's piece on the cross-fertilization between the arts and leadership is both timely and anticipated. Timely because, as Adler pointed out, a growing number of organizations, including business corporations, NGOs, and business schools have recognized the need to turn to the artistic community for inspiration to help them wade through the challenges and opportunities posed by growing complexities in the 21st century. In the PriceWaterhouseCoopers (PWC) Ninth Annual Global CEO Survey-Globalization and Complexity (2006: 32) that presented the findings based on interviews with l#410 CEOs from 45 countries around the world, 77% of the interviewees indicated that is all around and noted that the level of complexity in their organizations has increased over the past 3 years, with more in store for the future. In other words, managing complexity and chaos have become the watchwords for the 21st century. Thus, many of the so-called triedand-true approaches of the past may no longer be sufficient to assist us to cope with a business environment that Adler has characterized as anything but business as usual. Viewed in this context, Adler's piece is much anticipated because a paper in a scholarly publication, such as AMLE, that highlights the need to understand the interrelationship between leadership and the arts is long overdue; although Adler is not the first management scholar to write on this subject. John Kao, who served on the faculties of Harvard Business School and Stanford University, and is a much-soughtafter management consultant, wrote about how businesses can derive inspiration from listening to jazz and jamming with a group in his 1996 book, Jamming: The Ait and Discipline of Corporate Creativity. As early as 1983, Kao introduced an elective course on this subject at Harvard Business School. For people who are familiar with my research or the initiatives I have undertaken in my 5-year tenure as a member of the Executive Committee of the Academy of Management, particularly in my year as 2002 Academy Program Chair of the Denver Annual Meetings1 and in my year as president (2003-2004),2 it should come as no surprise that I share many of the views expressed by Alder. In this commentary, I will offer my own reflections on many of the issues raised in her article.

The Impact of the PricewaterhouseCoopers Merger on Auditor‐Client Alignment

This paper investigates the impact of the PricewaterhouseCoopers (PwC) merger in Australia on existing and potential clients of the new merged firm. From prior theory it is expected that some existing clients may have an incentive to switch away from a newly merged firm as the same larger firm now audits close competitors once audited by separate firms. Prior theory also suggests that another group of potential clients should be attracted to the newly merged firm where the merger enhances or creates industry specializations. The expectation is that in both of these instances there will be increased switching activity associated with the newly merged audit firm. Contrary to expectations, a significantly lower level of switching behaviour was observed for the newly merged firm compared with that of the other Big 5 firms, suggesting that an advantage of enhanced specialization may not be the attraction of new clients but the retention of existing clients. When comparing the nature of the switches, some support was found for the view that the switches to the new firm were likely to be in enhanced areas of specialization, but no evidence was found to suggest that close competitors would switch away from this firm. The greater rate of retention of clients compared with other Big 5 firms was not associated with a more competitive audit pricing policy.

In search of quality

PurposeIn February 2005, Lloyd James Group conducted an analysis of the list market, which showed an 8 percent decline in commercially available lists. The purpose of this paper is to consider the implication of this modest decline in commercially available data, looking at where those declines are occurring, where the growth areas are, and what other techniques are coming into play to partner work alongside traditional list usage to deliver the results that managers and shareholders are demanding. The paper aims to consider how one such additional technique – affinity marketing – is being used across a number of sectors with retail operations, and how this compares with sectors with no retail presence.Design/methodology/approachThe first piece of research discussed, In Search of Quality, was carried out in Q1 of 2005. The research was carried out through data sources: lists and data sources, Marketing UK, Catalogue and e‐Business Annual, Precision Marketing, DMIS, FEDMA, World Advertising Research Centre, Institute of Practitioners in Advertising, Office of National Statistics, PriceWaterhouse Coopers, KPMG. The second research paper discussed, A Growing Affinity, was carried out in October/November 2005 through telemarketing and e‐mail field work by Marketing UK. The research base was the UK top 1,000 companies in the banking, charity, credit card, hotel, insurance, retail, telecoms, travel and utility sectors. Future research would look at consumer perceptions of and reactions to affinity‐based campaign where a known organisation introducing a third party to the consumer and look at the perceived logic of different kinds of combinations.FindingsOver the past couple of decades, marketing in the UK has evolved considerably. A key aspect of this change has been the shift away from the use of mass marketing techniques in favour of a more tailored approach, with retail organisations attempting to deliver a more personalised marketing message to distinct groups of consumers. This development will continue, not with one technique in particular winning out over others, but with the marketer using an increasing range of tools – commercial lists and other third party data, affinity, inserts and further piggy‐back techniques, co‐branding, sponsorship, and more – to reach responsive consumers within their catchments in an increasingly fragmented marketing communications world.Originality/valueThis paper provides retail marketers with an outline of practical options available for use to enhance marketing campaigns and maintain critical volumes as well as quality. The conclusion is that marketers must use a combination of tools and channels to achieve the desired reach and rate of response in the face of data scarcity and increased media fragmentation.