LAGGED EFFECTS OF TRAINING ON FINANCIAL PERFORMANCE: EVIDENCE FROM LONGITUDINAL DATA

This paper examines the lagged association between training and financial performance of audit firms. Based on a panel data of 136 audit firms in Taiwan from 1992 to 1998, this paper constructs a year fixed effect regression model to test our hypotheses. Both partners’ and assistants’ training have significantly positive effects on financial performance with the former occurring in the current and one-year-lagged periods and the latter occurring in the one-year-lagged and two-year-lagged periods. Positive and significant association between training and financial performance informs practitioners that training contributes to audit firms and justifies the continuous education requirement in the public accounting profession. The evidence of one-year-delay effect of assistants’ training on performance conveys managerial implication to the practitioners in their employee recruitment policy. This paper is the first to exclusively examine the lagged association between training and financial performance at the organization level. The evidence of lagged association explains in part the mixed results on the relation between training and financial performance reported by prior studies. The two-year association between training and financial performance fills the literature gap left by researches on training both in the public accounting and in other industries.