Does the implementation of internal controls promote firm profitability? Evidence from private Vietnamese small- and medium-sized enterprises (SMEs)

Quang Vu and Nguyen Thi Thuy Nga

Finance Research Letters, 2022, vol. 45, issue C

Abstract: Previous studies have not investigated whether firms can use internal control (IC) systems as a means to promote firm profitability. Applying an instrumental variable approach to the data on small and medium-sized enterprises (SMEs) in the Vietnamese manufacturing industry, this paper discovered that implementing ICs does improve firm profitability. This result is driven by several mechanisms. First, the use of ICs decreases bribery. Second, although ICs do not enable access to credit, they advance the formalization process and help firms gain government support. This suggests that in the context of ineffective institutions, firms can improve their financial performance by applying the appropriate IC systems.

Keywords: Internal controls (ICs); Bribery; Credit access; Firm profitability; Vietnam (search for similar items in EconPapers)
JEL-codes: G01 G18 G21 G32 M41 M42 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612321002506
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:finlet:v:45:y:2022:i:c:s1544612321002506

DOI: 10.1016/j.frl.2021.102178

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().