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The individual characteristics of board members and internal control weakness: Evidence from China

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  • Lu, Yu
  • Cao, Yue

Abstract

This study examines the relationships between the individual characteristics of board members and internal control weaknesses using data from Chinese listed firms from 2007 to 2015. The results indicate that the individual characteristics of board members including education, experience, certification, integrity and training are related to internal control deficiencies. The results also show that the individual characteristics of board chairmen are related to internal control problems. The overall results demonstrate that internal control quality is better, internal control weaknesses are reduced and weakness remediation is more likely to be applied in firms in which board members and board chairpersons have stronger qualifications. Furthermore, ownership has a moderating impact on the relationship between board characteristics and internal control. However, board behavior does not mediate the relationship between board members and internal control. Thus, it is suggested that board characteristics and internal control are directly linked. It is useful for directors to know that the characteristics of board members do make a difference.

Suggested Citation

  • Lu, Yu & Cao, Yue, 2018. "The individual characteristics of board members and internal control weakness: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 51(C), pages 75-94.
    • Handle: RePEc:eee:pacfin:v:51:y:2018:i:c:p:75-94
    DOI: 10.1016/j.pacfin.2018.05.013
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