The impact of ineffective internal control on the value relevance of accounting information

The impact of ineffective internal control on the value relevance of accounting information

This paper investigates the value relevance of accounting information in the presence of ineffective internal control (IIC). Based on Ohlson's valuation model, this paper first documents that IIC can directly affect a firm's market value after control cost of capital, corporate governance,...

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Bibliographic Details
Main Authors: HU, Nan, QI, Baolei, TIAN, Gaoliang, YAO, Lee, ZENG, Zhen
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2013
Subjects:
ineffective internal control
book value
earnings
value relevance
market value
Accounting
Databases and Information Systems
Online Access:https://ink.library.smu.edu.sg/sis_research/8019
https://ink.library.smu.edu.sg/context/sis_research/article/9022/viewcontent/The_impact_of_ineffective_internal_control_on_the_value_relevance_of_accounting_information_pv.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:This paper investigates the value relevance of accounting information in the presence of ineffective internal control (IIC). Based on Ohlson's valuation model, this paper first documents that IIC can directly affect a firm's market value after control cost of capital, corporate governance, and other, value-relevant variables. Second, this paper finds that the value relevance of earnings and book value in determining a firm's market value are significantly reduced. Collectively, the results of this paper indicate that the effectiveness of internal controls can directly affect a firm's market value and the value relevance of accounting information.

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