THE ECONOMIC MECHANISM FOR REFORMATTING OUTSOURCED ACCOUNTING SERVICES MARKETS IN THE EU
Keywords:
accounting outsourcing, anti-money laundering, market consolidation, market regulation, professional licensing.Abstract
Against the backdrop of the European Union's ongoing harmonisation of professional service markets and the strengthening of anti-money laundering frameworks, this study examines how mandatory professional licensing functions as a market regulation mechanism in the outsourced accounting sector. The study develops a theoretical and conceptual model identifying the causal chain through which regulatory intervention generates compliance costs that operate as entry barriers, produce quality signalling effects, drive pricing adjustments, consolidate the provider market, and generate regulatory avoidance behaviour. Drawing on institutional theory, service quality frameworks, and market consolidation theory, the study analyses how licensing reshapes professional service markets in the European economic space. A longitudinal quasi-experimental before-after design is applied to comprehensive sectoral data spanning 2005–2025, covering 3,567 licensed providers, turnover trends, and comparative institutional evidence from 27 EU member states. Descriptive statistics and theoretical triangulation connect observed licensing effects with SERVQUAL dimensions, institutional isomorphism, and market consolidation theory. Following mandatory licensing in troduced in 2021–2023 in Latvia, the number of providers declined by 14.6% by 2025, while sector turnover grew by approximately 13% annually. By March 2025, 86% of providers had obtained licences. Licensing strengthened quality signalling and encouraged client migration toward licensed providers, while also contributing to indicative price increases of approximately 10% to 15%, regulatory avoidance through NACE code switching, and disproportionate compliance pressure on micro-enterprises. The study adds original empirical evidence from an emerging EU market and offers policy recommendations to improve enforcement, professional education, and regulatory effectiveness in the European economic space.
JEL: M40, M41, K20, L84.
References
Abbott, A. (1988). The system of professions: An essay on the division of expert labor. The University of Chicago Press.
Acs, Z. J., & Audretsch, D. B. (1989, May). Small-firm entry in US manufacturing. Economica, 56(222), 255–265. https://doi.org/10.2307/2554043
Akerlof, G. A. (1970). The market for “lemons”: Quality uncertainty and the market mechanism. The Quarterly Journal of Economics, 84(3), 488–500. https://doi.org/10.2307/1879431
Carpenter, D. M. II, Knepper, L., Erickson, A. C., & Ross, J. K. (2012, May). License to work: A national study of burdens from occupational licensing (1st ed.). Institute for Justice.https://ij.org/wp-content/uploads/2022/11/licensetowork1.pdf
Central Statistical Bureau of Latvia. (2025, November 14). Entrepreneurship indicators of enterprises 2005-2024 (UFR010) [Data set]. https://stat.gov.lv/en/statistics-themes/business/entrepreneurship-indicators/tables/ufr010-entrepreneurship-indicators
Council of Europe. (2018, July). Anti-money laundering and counter-terrorist financing measures: Latvia: Fifth Round Mutual Evaluation Report (No. 8).
Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL). https://rm.coe.int/moneyval-2018-8-5th-round-mer-latvia/16808ce61b
DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160. https://doi.org/10.2307/2095101
Eurostat. (n.d.-a). Structural business statistics: Database. Retrieved March 31, 2025, from https://ec.europa.eu/eurostat/web/structural-business-statistics
Eurostat. (n.d.-b). Business demography by legal form and NACE Rev.2 activity. [Data set] Retrieved March 31, 2025, from https://ec.europa.eu/eurostat/databrowser/view/bd_l_form__custom_16622368/default/table?lang=en
Eurostat. (n.d.-c). Annual enterprise statistics by size class for special aggregates of NACE Rev. 2 activities (2005-2020) (sbs_sc_sca_r2). [Data set] https://doi.org/10.2908/sbs_sc_sca_r2
Friedman, M. (1962). Capitalism and freedom. The University of Chicago Press. Greenwood, R., Suddaby, R., & Hinings, C. R. (2002). Theorizing change: The role of professional associations in the transformation of institutionalized fields. Academy of Management Journal, 45(1), 58–80. https://doi.org/10.5465/3069285
Kleiner, M. M. (2000). Occupational licensing. Journal of Economic Perspectives, 14(4), 189–202. https://doi.org/10.1257/jep.14.4.189
Kleiner, M. M., & Krueger, A. B. (2013). Analyzing the extent and influence of occupational licensing on the labor market. Journal of Labor Economics, 31 (S1), S173–S202. https://doi.org/10.1086/669060
Larson, M. S. (1977). The rise of professionalism: A sociological analysis. University of California Press. Latvian Enterprise Register. (n.d.). Commercial register information system. Retrieved March 30, 2025, from https://www.ur.gov.lv/en/
Leland, H. E. (1979). Quacks, lemons, and licensing: A theory of minimum quality standards. Journal of Political Economy, 87(6), 1328–1346. https://doi.org/10.1086/260838
Meyer, J. W., & Rowan, B. (1977). Institutionalized organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83(2), 340–363. https://doi.org/10.1086/226550
Mikko, V. (2018). Outsourcing accounting functions: Measuring benefits, impact on capabilities, and firm performance [Master’s thesis, Oulu Business School]. https://oulurepo.oulu.fi/bitstream/handle/10024/11371/nbnfioulu-201806062465.pdf
Oliver, C. (1991). Strategic responses to institutional processes. Academy of Management Review, 16(1), 145–179. https://doi.org/10.5465/amr.1991.4279002
Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1988). SERVQUAL: A multipleitem scale for measuring consumer perceptions of service quality. Journal of Retailing, 64 (1), 12–40.
Saeima. (2021). Grāmatvedībaslikums [Accounting law]. https://likumi.lv/ta/id/324249-gramatvedibas-likums
Scott, W. R. (2008). Institutions and organizations: Ideas and interests (3rd ed.). Sage Publications.
Sharma, G. K. (2023). Advantages & impacts of outsourcing accounting to accounting firms. International Journal of Financial Management and Economics, 6(1), 239–244. https://doi.org/10.33545/26179210.2023.v6.i1.204
State Revenue Service. (n.d.). Licencēto ārpakalpojuma grāmatvežu reģistrs [Registry of licensed accounting service providers]. Retrieved March 31, 2025, from https://www6.vid.gov.lv/LAGR?utm_source
Stigler, G. J. (1971). The theory of economic regulation. The Bell Journal of Economics and Management Science, 2(1), 3-21. https://doi.org/10.2307/3003160
The White House. (2015, July). Occupational licensing: A framework for policymakers. https://obamawhitehouse.archives.gov/sites/default/files/docs/licensing_report_final_nonembargo.pdf
Received: April 7, 2026.
Reviewed: May 20, 2026.
Accepted: June 15, 2026.
Downloads
Published
How to Cite
Issue
Section
License
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
