Internal Control, Environmental Uncertainty and Total Factor Productivity of Firms—Evidence from Chinese Capital Market

Kun Wang, Lichen Liu, Mengyue Deng and Yaxian Feng ()
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Kun Wang: School of Management, Wuhan Institute of Technology, Wuhan 430205, China
Lichen Liu: School of Management, Wuhan Institute of Technology, Wuhan 430205, China
Mengyue Deng: School of Information Science and Technology, Dalian Maritime University, Dalian 116026, China
Yaxian Feng: School of Management, Wuhan Institute of Technology, Wuhan 430205, China

Sustainability, 2022, vol. 15, issue 1, 1-17

Abstract: Based on the data of China’s A-share listed companies from 2009 to 2019, this paper empirically examines the relationship between internal control and total factor productivity of enterprises in the presence of environmental uncertainty. The research shows that high quality internal control can effectively improve the total factor productivity of enterprises. Environmental uncertainty negatively moderates the relationship between internal control quality and total factor productivity. Further research in this paper shows that there are heterogeneous effects on the adjusting effects of different life cycles, property rights and regional distribution of enterprises, that is, when enterprises are in the growth stage, the quality of internal control has a significant effect on the improvement of total factor productivity of enterprises. For enterprises and non-state-owned enterprises located in the eastern region, the inhibition and adjustment effect of environmental uncertainty is more significant. At the same time, the supplementary research finds that internal control directly affects the total factor productivity of enterprises through the intermediary role of promoting enterprise development and innovation and easing financing constraints. The research conclusions enrich the literature on the mechanism of internal control affecting enterprises’ total factor productivity and provide a new reference and basis for enterprises to effectively manage the internal environment, strengthen the risk control management mechanism and improve the enterprise value.

Keywords: internal control; total factor productivity; environmental uncertainty; moderating effect (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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