One could dispute this. Given the same overall quality of a small and a large grand, the grand will produce sound that most people would judge as "better". There are a couple of reasons whay that is. First, as you said, the larger instrument can play louder, so it has a larger dynamic range, which means that there are more possibilities for dynamics. This does not necessarily mean "better" sound, but it should not be neglected. Second, the sound is richer on larger pianos, i.e. there is a larger content of higher harmonics in the sound. This is usually perceived as more pleasant, that is "better". Of course, it may be more difficult to play something very crisply, but that is a matter of control and independent of the piano. Third, sound decay is slower on large instruments. So, overall, a large instrument offers much more room for sound production; it allows subtle variations that a small instrument can't provide, while being able of doing everything that a small instrument can do. Thus, in the hands of a master, the large instrument will produce a "better" sound.