The Capital Asset Pricing Model has been challenged recently by several studies that point to certain anomalies in the capital market related to firm size. Banz [3] reported a nonlinear relation between the aggregate market value of a firm's common stock and the stock's mean return. He found that firms with small market values had large and positive residual returns over a period of at least 40 years. Reinganum [23] found that high earning-price (E/P) stocks had higher returns than low E/P-ratio stocks and that, after controlling for size, the E/P effect largely disappeared. Although they rejected the hypothesis that the anomalies are due to inefficiency in the capital market, the two authors are not able to identify the economic factors that might explain the effect of firm size on the functioning of the capital market.

Résumé. Les auteurs examinent certaines des questions fondamentales relatives à la concentration, à l'intensité de la concurrence et aux rendements d'échelle du secteur canadien de la vérification. Selon les résultats de leurs travaux, il pourrait être plus approprié de construire les indices de concentration en fonction des «sept grands» qu'en fonction des «huit grands» cabinets comme le veut la tradition. Les auteurs en viennent également à la conclusion que le secteur est assujetti à long terme à des rendements d'échelle constants et que le marché des services de vérification est assez concurrentiel.

We examine some of the basic issues concerning concentration, the level of competition, and returns to scale in the Canadian audit industry. Our findings indicate that it may be more appropriate to construct the concentration indexes in terms of the “Big Seven” instead of the traditional “Big Eight” firms. The results also indicate that the industry is subject in the long run to constant returns to scale and imply fairly competitive markets for audit services.

Reviews various books related to accounting. "Advanced Accounting," 3rd ed., by Floyd A. Beams; "Three Degrees Above Zero: Bell Labs in the Information Age," by Jeremy Bernstein; "Wiley-Ronald Auditing Service," by D.R. Carmichael and Martin Benis; "Dictionary of Accounting Terms," by Derek French.