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The Value of Internal Control during a Crisis: Evidence from Enterprise Resilience

Author

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  • Nannan Wang

    (School of Economics and Management, Shihezi University, Shihezi 832000, China)

  • Dengfeng Cui

    (School of Economics and Management, Shihezi University, Shihezi 832000, China)

  • Chengguo Jin

    (College of Economics and Management, Beibu Gulf University, Qinzhou 535011, China
    Beibu Gulf Marine Development Research Center, Qinzhou 535011, China)

Abstract

Internal control is an important internal governance mechanism of enterprises and plays an important role in preventing and controlling corporate risks. This paper utilizes COVID-19 shocks and uses data from listed companies in China for 2019–2021 in order to study the impact of internal control on enterprise resilience and its functioning mechanism. The findings show that internal control significantly improves enterprise resilience during a crisis. By using firm characteristic quantile regressions, it is found that under a crisis, larger firms with sufficient cash flow from operating activities are more protected by internal control and more resilient. Mechanistic analysis suggests that internal control further increases enterprise resilience by improving resource allocation efficiency, reducing operating risk, and increasing innovation output. Further analysis shows that government support can enhance the resilience of firms during crises through tax and fiscal policies; a better business environment enhances firms’ ability to withstand risks in crisis situations and helps them gain a competitive advantage in crisis situations. Based on this, this paper provides empirical evidence for revising and improving the internal control system of enterprises to reduce the negative impact of public health emergencies in the context of epidemics.

Suggested Citation

  • Nannan Wang & Dengfeng Cui & Chengguo Jin, 2022. "The Value of Internal Control during a Crisis: Evidence from Enterprise Resilience," Sustainability, MDPI, vol. 15(1), pages 1-18, December.
    • Handle: RePEc:gam:jsusta:v:15:y:2022:i:1:p:513-:d:1017723
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    References listed on IDEAS

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    1. Wu, Haiyan & Qiao, Yuxuan & Luo, Chuxiang, 2024. "Cross-border e-commerce, trade digitisation and enterprise export resilience," Finance Research Letters, Elsevier, vol. 65(C).

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