Determinants and economic consequences of voluntary disclosure of internal control weaknesses in China

Xu-Dong Ji, Wei Lu, Wen Qu

    Research output: Contribution to journalArticleResearchpeer-review

    29 Citations (Scopus)

    Abstract

    This paper investigates the determinants and economic consequences of disclosure of internal control weaknesses (ICWs) by Chinese listed firms under the voluntary disclosure regime over 2010-2011. We find that the probability of firms disclosing ICWs is not only associated with firm characteristics such as profitability, age and business complexity, but is also strongly related to the unique attributes of corporate governance and ownership structure in Chinese listed firms, e.g. the independence of the supervisory board, political connections, concentration of the top 3 shareholders ownership and tradability of shares.Our results show that the severity of the ICWs disclosed is negatively and significantly associated with earnings response coefficients (ERCs), and audit assurance of ICRs has a significant moderating effect on the relationship between ICWs and ERCs. Our research adds further evidence to support the implementation of SOX-type regulations globally.
    Original languageEnglish
    Pages (from-to)1 - 17
    Number of pages17
    JournalJournal of Contemporary Accounting and Economics
    Volume11
    Issue number1
    DOIs
    Publication statusPublished - 2015

    Cite this