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Can independent directors improve internal control quality in China?

Hu, Guoqiang, Yuan, Rongli and Xiao, Jason Zezhong 2014. Can independent directors improve internal control quality in China? The European Journal of Finance , p. 1. 10.1080/1351847X.2014.919329

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Abstract

This study conceptualises the monitoring power of independent directors (IDs) as consisting of specialist expertise or competence, incentives, balancing power and diligence. It then empirically investigates the influence of IDs’ monitoring power on internal control quality (ICQ), which is proxied by the voluntary disclosure of auditors’ reports on internal control and financial restatements released by China's A-share firms during 2006–2010. We find that the combined ID monitoring power index has a positive and significant effect on ICQ, which is robust to different proxies for ICQ, and that its components are also positively and significantly associated with either or (in most cases) both measures of ICQ. Overall, our evidence indicates that IDs’ monitoring power plays a positive role in improving ICQ in China.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
J Political Science > JF Political institutions (General)
Uncontrolled Keywords: corporate governance, independent directors, internal control quality, auditors’ reports on internal control, financial restatement
Publisher: Taylor and Francis
ISSN: 1351-847X
Last Modified: 04 Jun 2017 06:26
URI: http://orca.cf.ac.uk/id/eprint/60175

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