Service Quality, Size, and Performance of Audit Firms : Consideration of Market Segments and Business Strategies

This study investigates the relative importance between service quality and firm size in the performance determinants of audit firms under different market segments and business strategies. This study extracts a human capital-based service quality by the principal component analysis technique. In terms of market segment, total samples are divided into national, regional, and local audit firms. Further, based on the business strategies audit firms take, regional and local firms are classified into two categories: stability and expansion type firms. Empirical results indicate that service quality is a more important performance determinant than firm size in the national firms. However, firm size is more important in the regional and local firms. Next, operating performance of expansion regional firms is better than that of stability regional firms. The extent of performance effects of service quality and firm size differs between audit firms taking varied business strategies