The influence of qualified foreign institutional investors on internal control quality: Evidence from China

Zhe Li, Bo Wang, Tianlong Wu and Dan Zhou

International Review of Financial Analysis, 2021, vol. 78, issue C

Abstract: This study aims to investigate whether qualified foreign institutional investors (QFIIs) improve companies' internal control quality to mitigate information asymmetry. By analysing a sample of 22,310 firm-year observations from Chinese listed companies between 2005 and 2017, we found that companies with QFIIs exhibit higher internal control quality and fewer internal control deficiencies. In particular, higher QFII ownership is associated with higher quality of internal control. Interestingly, QFIIs from high-governance-quality countries are more likely to improve the internal control system of their investee companies. Finally, the improvement in internal control quality attributed to QFIIs leads to better operating performance. Our results are robust to alternative measures of QFIIs, alternative proxies for internal control quality, and various controls for endogeneity issues.

Keywords: Qualified foreign institutional investors; Internal control quality; Chinese equity markets; Information asymmetry (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521921002428
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:78:y:2021:i:c:s1057521921002428

DOI: 10.1016/j.irfa.2021.101916

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().