The impact of material internal control weaknesses, institutional ownership and managerial ownership on future-oriented disclosure: evidence from Islamic economy

Arash Arianpoor, Imad Taher Lamloom, Hameed Mohsin Khayoon and Ali Shakir Zaidan

Journal of Islamic Accounting and Business Research, 2023, vol. 16, issue 5, 855-872

Abstract: Purpose - This study aims to assess the effect of material internal control weaknesses (MICW) on the relationship between ownership structures and future-oriented disclosure. Design/methodology/approach - A total number of 197 firms were assessed in this study during 2014–2021. Two measures were used for MICW. First, the number of existing MICW was assessed in independent auditors’ reports. In Iran, the maximum number of weaknesses is 13. Second, the scoring (0 or 1) method was used as a dummy variable, 1 for a firm with MICW and otherwise 0. Moreover, the scoring (0 or 1) method was used to measure the level of future-oriented disclosure of 13 indicators. Findings - The findings showed that institutional ownership and managerial ownership have a significant positive effect on future-oriented disclosure, whereas the MICW have a significant negative effect on future-oriented disclosure. In addition, MICW played a moderator role in the relationship between ownership structures and future-oriented disclosure. The robustness checks confirmed the results. Originality/value - As the studies conducted on future-oriented disclosure and the contributing factors are limited, and also the effect of MICW on future-oriented disclosure is not explored, the present findings can show the importance of the study, and fill the gap in this field. This study offers theoretical and practical implications to drive policymakers and managers to the effectiveness of internal control and future-oriented transparency.

Keywords: Future-oriented disclosure; Internal controls; Material internal control weaknesses (MICW); Ownership structures; Institutional ownership; Managerial ownership (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jiabrp:jiabr-02-2023-0052

DOI: 10.1108/JIABR-02-2023-0052

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