Internal control and corporate innovation: evidence from China

Ping, Li; Wei, Shiming; Tang, Qingquan; Zheng, Yuhui

doi:10.1080/16081625.2017.1370380

Cited by 45 publications

(38 citation statements)

References 41 publications

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“…Fourth, although cash flows from operations (CFO) may lead to more investments in both types of expenditures (Bae et al, 2017), there could be a possibility of diversion of cash flows from investment in R&D Corporate governance and investments opportunities to investments in physical assets in the presence of agency problem of "quiet life" (Shaikh et al, 2018). Lastly, leverage (LEV) can constrain a company's investments, particularly, in the case of R&D investments, since debtholders may discourage such risky activities due to asymmetry in future payoffs (Li et al, 2019). It also reduces the free cash flow by bonding managers to pay interest payments periodically (Jensen, 1986).…”

Section: Variablesmentioning

confidence: 99%

Corporate governance mechanisms and corporate investments: evidence from India

Suman

Singh

2020

IJPPM

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PurposeThe purpose of this paper is to empirically investigate the influence of corporate governance variables relating to the board of directors, audit and ownership on the agency problems that inflict a firm's investments in capital and research and development (R&D) expenditures. This study posits that the R&D investments are inflicted by the agency problem of “quiet life” whereas “empire-building” agency problem affects capital expenditure decisions.Design/methodology/ approachThis study analyses the investment behaviour of non-financial and non-utility firms listed on NIFTY 200 from FY 2009 to FY 2018 using a static and dynamic model.FindingsThe results from the static model suggest that ownership concentration mitigates the agency problem of the “quiet life” that affects R&D expenditures. However, no corporate governance attribute has a significant impact on R&D investments under the assumption of the dynamic model. In respect of capital expenditures, the analysis of static model yields that audits by large auditor firms and usage of non-audit services ameliorate the agency problem of “empire-building”. The results from the dynamic model show that independent boards worsen it. They also continue to provide empirical evidence in favour of large auditors.Originality/valueThis paper contributes to the literature on the corporate governance-investment association by simultaneously examining the impact of multiple corporate governance attributes on the agency problems of “quiet life” and “empire-building” that affect R&D and capital expenditures, respectively, in a static and dynamic context for a sample of Indian firms.

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Section: Variablesmentioning

confidence: 99%

Corporate governance mechanisms and corporate investments: evidence from India

Suman

Singh

2020

IJPPM

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“…Internal control through the lens of institutional work: a… (Li et al 2019a) control over financial reporting (ICFR), meaning 'the policies, processes, and procedures intended to ensure financial statements are reliable' (e.g. Ashbaugh-Skaife et al 2013, p. 91).…”

Section: The Meaning Of Internal Controlmentioning

confidence: 99%

Internal control through the lens of institutional work: a systematic literature review

Henk

2020

J Manag Control

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Despite the growing interest in research on the topic of internal control, there is confusion about the concept in both theory and practice. This study addresses this lack of clarity by systematically structuring the literature that uses the concept by investigating what we know from previous studies about the practice of internal control and how it is institutionalized. To examine the existing literature in this field, the paper utilizes the theoretical lens of ‘institutional work’. The review finds that the understanding of internal control is currently divided: one part of the literature understands the concept as internal control over financial reporting, while the other part has a more global and strategic understanding of the term. Internal control is institutionalized by different organizational actors at the micro level in an attempt to implement internal control systems that are not a simple act of compliance but present an added value for the organization. At the same time, it is noteworthy that not all categories of institutional work could be identified in the internal control literature, indicating that the actors are largely limited by their institutional embeddedness. The paper also presents an aggregated understanding of the term internal control, which can therefore significantly supplement the efforts of practitioners and regulators to implement internal control procedures that add value for the corporate governance of organizations.

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“…In our main test, we keep the observations in year 0 and treat them as occurring after the firm entered the list ( POST = 1) . We estimate the following regression to test the effects of short selling on the firms’ internal control quality.

I C_i n d e x_{i, t} = α + β_{1} L I S T_{i} + β_{2} P O S T_{i, t} + β_{3} P O S T_{i, t} \times L I S T_{i} + \sum C o n t r o l + \sum m a t c h e d p a i r + ε_{i, t},

where IC_index is an index developed by DIB Company to measure internal control quality, which has been widely used by Chinese researchers (Li et al ., ; Wang et al ., ). According to C‐SOX, a corporate internal control system contains five elements: internal environment, risk assessment, controlling activity, information and communication and internal monitoring.…”

Section: Methodsmentioning

confidence: 99%

Can short selling improve internal control? An empirical study based on the difference‐in‐differences model

Chen

Lin

et al. 2019

Accounting & Finance

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Based on pilot margin trading in China, this study examines how short selling affects internal control quality in listed firms. Using the difference-in-differences approach, we find that compared with control firms, firms that are eligible for short selling significantly improve their internal control after they are designated as underlying securities. We consider the effects of state ownership and external auditors. The improvement in internal control is only significant for non-state-owned firms and firms audited by non-Big 4 auditors. These findings indicate that short selling can improve firms' internal control and play a role in their corporate governance.

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Internal control and corporate innovation: evidence from China

Cited by 45 publications

References 41 publications

Corporate governance mechanisms and corporate investments: evidence from India

Corporate governance mechanisms and corporate investments: evidence from India

Internal control through the lens of institutional work: a systematic literature review

Can short selling improve internal control? An empirical study based on the difference‐in‐differences model

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