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Can the academic experience of senior leadership improve corporate internal control quality?

Author

Listed:
  • Kun Zhang

    (Hebei University of Economics and Business)

  • Yuanyuan Wang

    (Hebei University of Economics and Business)

  • Xuegang Cui

    (Beijing Normal University)

  • Hong Yue

    (Beijing Information Science and Technology University)

Abstract

In this paper, we investigate whether the academic experience of senior corporate leaders, often referred to as ‘top management’, impacts the quality of corporate internal control. Data collected from Shanghai and Shenzhen A-share listed firms in China demonstrate that senior leaders having academic experience can improve corporate internal control quality significantly. This study also finds that this impact varies with a firm’s agency costs and risk. In firms with higher agency cost (state-owned or larger firms) or higher risk, academic top managers play a more significant role in improving corporate internal control quality. The results are attributed to higher ethical standards, risk aversion and risk management abilities of senior executives given the perspectives awarded them during their academic experience. Further analysis shows that the differing roles of senior executives within such teams are quite distinct in how they improve internal control quality. Our findings contribute to the current internal control literature and have policy implications for evaluation of corporate internal control. It may also help enhance the processes in recruiting and selecting senior executives.

Suggested Citation

  • Kun Zhang & Yuanyuan Wang & Xuegang Cui & Hong Yue, 2022. "Can the academic experience of senior leadership improve corporate internal control quality?," Asian Business & Management, Palgrave Macmillan, vol. 21(2), pages 231-260, April.
    • Handle: RePEc:pal:abaman:v:21:y:2022:i:2:d:10.1057_s41291-020-00127-x
    DOI: 10.1057/s41291-020-00127-x
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    1. Tu Thanh Hoai & Nguyen Phong Nguyen, 2022. "Internal Control Systems and Performance of Emerging Market Firms: The Moderating Roles of Leadership Consistency and Quality," SAGE Open, , vol. 12(3), pages 21582440221, September.

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    More about this item

    Keywords

    Academic experience; Internal control quality; Ethical standards; Risk preference;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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