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

Nannan Wang, Dengfeng Cui and Chengguo Jin ()
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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

Sustainability, 2022, vol. 15, issue 1, 1-18

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.

Keywords: internal control; enterprise resilience; resource allocation efficiency; operating risk; innovation output (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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