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

Ji,X-D, Lu,W and Qu,W 2015, Determinants and economic consequences of voluntary disclosure of internal control weaknesses in China, Journal of contemporary accounting and economics, vol. 11, no. 1, pp. 1-17, doi: 10.1016/j.jcae.2014.12.001.

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Title Determinants and economic consequences of voluntary disclosure of internal control weaknesses in China
Author(s) Ji,X-D
Lu,W
Qu,W
Journal name Journal of contemporary accounting and economics
Volume number 11
Issue number 1
Start page 1
End page 17
Total pages 17
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2015-04
ISSN 1815-5669
Keyword(s) China
Corporate governance
Internal control weakness (ICW)
Ownership structure
Voluntary disclosure
Summary 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.
Language eng
DOI 10.1016/j.jcae.2014.12.001
Field of Research 150103 Financial Accounting
Socio Economic Objective 900102 Investment Services (excl. Superannuation)
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2015, Elsevier
Persistent URL http://hdl.handle.net/10536/DRO/DU:30069479

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