The impact of internal control weaknesses on firms' cash policies
Mikhail Pevzner and
Gregory Gaynor
International Journal of Accounting, Auditing and Performance Evaluation, 2016, vol. 12, issue 4, 396-421
Abstract:
We study the association between firms' Section 302 and Section 404 internal control weaknesses and these firms' cash-to-cash flow sensitivities. We also examine whether the presence of the internal control weaknesses affects the relationship between firms' asset liquidity and stock liquidity. We find that the presence of Section 404 internal control weaknesses is associated with stronger cash-to-cash flow sensitivities and with weaker impact of higher asset liquidity on stock liquidity. Our results suggest that internal control weaknesses increase firms' reliance on internal, as opposed to external, financing. Also, internal control weaknesses increase uncertainty over future uses of cash, thereby reducing the positive impact of higher relative cash balances on stock liquidity. Thus, our study provides additional evidence on the potential costs of internal control weaknesses.
Keywords: cash policies; internal control weaknesses; asset liquidity; stock liquidity; cash-to-cash flow; cash balances. (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
http://www.inderscience.com/link.php?id=79865 (text/html)
Access to full text is restricted to subscribers.
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:ids:ijaape:v:12:y:2016:i:4:p:396-421
Access Statistics for this article
More articles in International Journal of Accounting, Auditing and Performance Evaluation from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().