Reputable Inside Directors and Internal Control Effectiveness

IF 2.5 3区 管理学 Q2 BUSINESS, FINANCE European Accounting Review Pub Date : 2022-12-20 DOI:10.1080/09638180.2022.2156573
Zhijun Lin, Byron Y. Song, Zhimin Tian
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Abstract

Internal control effectiveness is an important indicator of financial reporting quality. This study investigates whether reputable inside directors impact a firm’s internal control over financial reporting. Using a large sample of Standard & Poor’s 1500 firms from 2004 to 2012, we find that firms with reputable inside directors are less likely to have reported and likely internal control weaknesses and the association is more pronounced when (1) firms have higher needs for monitoring; (2) firms have higher costs of misreporting; (3) the reputable inside directors have higher reputational concerns; and (4) the reputable inside directors have no connections with the chief executive officers. We also find that the likelihood of remediating internal control weaknesses is significantly increased when new reputable inside directors join a firm. These findings enrich prior empirical studies examining the determinants of internal control weaknesses and have corporate governance policy implications for regulators by supporting the desirable role of inside directors.

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声誉良好的内部董事与内部控制有效性
内部控制有效性是衡量财务报告质量的重要指标。本研究探讨声誉良好的内部董事是否会影响公司对财务报告的内部控制。使用Standard &从2004年到2012年,我们发现拥有声誉良好的内部董事的公司不太可能报告和可能存在内部控制缺陷,并且当(1)公司对监督的需求更高时,这种关联更为明显;(2)企业的误报成本较高;(3)声誉良好的内部董事具有更高的声誉关注度;(4)声誉良好的内部董事与首席执行官无关联。我们还发现,当新的声誉良好的内部董事加入公司时,纠正内部控制缺陷的可能性显着增加。这些发现丰富了先前的实证研究,考察了内部控制弱点的决定因素,并通过支持内部董事的理想作用,为监管机构提供了公司治理政策启示。
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来源期刊
European Accounting Review
European Accounting Review BUSINESS, FINANCE-
CiteScore
7.00
自引率
6.10%
发文量
58
期刊介绍: Devoted to the advancement of accounting knowledge, it provides a forum for the publication of high quality accounting research manuscripts. The journal acknowledges its European origins and the distinctive variety of the European accounting research community. Conscious of these origins, European Accounting Review emphasises openness and flexibility, not only regarding the substantive issues of accounting research, but also with respect to paradigms, methodologies and styles of conducting that research. Though European Accounting Review is a truly international journal, it also holds a unique position as it is the only accounting journal to provide a European forum for the reporting of accounting research.
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