Internal Control, Negative News, and Corporate Performance An Empirical Analysis Based on China's Strategic Emerging Enterprises

Ying Cao, Yuanying Chi and Jianbin Wei

Advances in Management and Applied Economics, 2023, vol. 13, issue 1, 2

Abstract: In the information age, negative news affects corporate performance due to its powerful ability to spread and disrupt. Existing studies examine the linear relationship between negative news and corporate performance and explore the ex-post response mechanism of negative news. However, the nonlinear relationship between negative news and corporate performance and the role and mechanisms of ex-ante prevention of negative news by corporate control factors are unclear. We explore these issues using a sample of Chinese strategic emerging companies from 2012 to 2020. Our results show that: there is an inverted U-shaped effect of negative news intensity on corporate performance; internal control dampens negative news intensity; corporate shareholder responsibility and corporate violations degree partially mediate the negative relationship between internal control and negative news intensity, with the joint mediation effect of the two accounts for 39% of the total effect. Our study identifies an 'optimal range' of negative news intensity that is beneficial to corporate performance and finds the role of internal control in the governance of negative news intensity and the mechanisms of action, which contributes to further understanding of the impact of negative news on firm performance and has important implications for the governance of corporate opinion. Â JEL classification numbers: G30, M10, M20.

Keywords: Corporate performance; Corporate shareholder responsibility; Corporate violation degree; Internal control; Negative news intensity. (search for similar items in EconPapers)
Date: 2023
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