Does internal control over financial reporting really alleviate agency conflicts?

Baolei Qi, Liuchuang Li, Qing Zhou, Jinghui Sun

Research output: Contribution to journalArticlepeer-review

18 Citations (Scopus)


This study investigates whether internal control over financial reporting
(ICFR) alleviates the managerial expropriation of corporate resources. We do
this by examining the potential effects of material weaknesses in internal
control on the values of corporate cash holdings and capital expenditures. Our
findings suggest that ICFR facilitates the scrutiny and discipline of capital
markets and thus alleviates the agency problems. Our results support the
premise that high financial reporting quality impairs managers’ abilities to use
corporate resources in a self-serving manner.
Original languageEnglish
Pages (from-to)1101-1125
Number of pages25
JournalAccounting and Finance
Issue number4
Publication statusPublished - 2017
Externally publishedYes


  • agency conflicts
  • capital expenditures
  • cash holdings
  • internal control


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