Does gambling culture affect corporate internal control? Evidence from China

Lin Pan, Zhanbo Zhuang, Chuanlu Ge and Qiyue Cui

Finance Research Letters, 2025, vol. 76, issue C

Abstract: We examine the impact of local gambling culture on corporate internal control using A-share listed companies from 2007 to 2020. We find that firms exhibit inferior internal control in regions with a more robust gambling culture. Mechanism test results show that gambling culture induces firms to undertake risk-taking activities. Moreover, the detrimental impact of gambling culture on internal control is stronger when management exhibits overconfidence. Still, gambling culture's negative effect on internal control quality is mitigated when management has a large shareholding. We also find that audit committee governance can mitigate the negative effect of gambling culture on internal control.

Keywords: Gambling culture; Internal control; Audit committee governance (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325002259

DOI: 10.1016/j.frl.2025.106961

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