Professional Staff Turnover and Organizational Performance in Public Accounting Firms

The study of the potential relationships between employee turnover and organizational performance has been important for researchers, practitioners and audit regulators. However, limited evidence exists regarding the association between staff turnover and organizational performance in professional accounting firms. The present study aims to fill this gap in the literature by using a unique hand-collected dataset from Korea. We find that the collective turnover rate of professional staff is negatively associated with public accounting firms' profitability and productivity. When considering the turnover rates of partners and senior certified public accountants (CPAs) separately, we observe that although both partner and senior CPA turnover are negatively associated with profitability and productivity, partner turnover is more strongly associated with these outcomes. Additionally, we find that audit partner turnover is associated with an increase in the percentage of auditing enforcements and a decrease in the audit client retention rate, which may reflect challenges in maintaining audit quality and audit client relations at the accounting firm level. We further find that the negative associations of professional staff turnover with profitability and productivity are less pronounced for Big 4 accounting firms, but the negative association with audit client retention is more pronounced for these firms. Overall, the results suggest that, although turnover is negatively associated with the organization-level outcomes of public accounting firms, the turnover–performance relationship depends on moderators such as job level and organization size.