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Chaney, Jeter, and Shivakumar (2004, page 58) exclude firms with less than 1 million pound in total assets

Further, we exclude firms with less than £1 million in total assets

I am wondering why they have the benchmark and exclude firms with total assets higher than 1 million pound? Is there any international study also limits the firms whose total assets is higher than $1 million ?

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    $\begingroup$ Academic studies occasionally exclude small firms (small being whatever is relevant to the study: market size, book value, total assets...). That's because they are not comparable to larger firms in their competition amongst peers, information availability, access to capital, trading liquidity, etc.). Your paper studies the role of the Big 5. Perhaps these firms are less likely to audit small firms such that their removal is appropriate for the study. Normally, authors explain why they exclude parts of their sample. If they don't, it's typically standard in the literature. $\endgroup$
    – Kevin
    Aug 28 at 11:32
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    $\begingroup$ You only state half of the sentence from the paper in your question. The full sentence explains the decision of the authors. They write (in full): Further, we exclude firms with less than £1 million in total assets, since many of the variables, including audit fees, are rounded to the nearest thousand and their inclusion could introduce significant noise in the analysis.. $\endgroup$
    – Kevin
    Aug 28 at 13:34
  • $\begingroup$ @Kevin Thank you so much, do you have any reference about "hat's because they are not comparable to larger firms in their competition amongst peers, information availability, access to capital, trading liquidity". Thanks a heap $\endgroup$
    – Louise
    Aug 29 at 11:34

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