The impact of ineffective internal control on the value relevance of accounting information

Nan Hu, Baolei Qi, Gaoliang Tian, Lee Yao and Zhen Zeng

Asia-Pacific Journal of Accounting & Economics, 2013, vol. 20, issue 3, 334-347

Abstract: This paper investigates the value relevance of accounting information in the presence of ineffective internal control (IIC). Based on Ohlson's valuation model, this paper first documents that IIC can directly affect a firm's market value after control cost of capital, corporate governance, and other, value-relevant variables. Second, this paper finds that the value relevance of earnings and book value in determining a firm's market value are significantly reduced. Collectively, the results of this paper indicate that the effectiveness of internal controls can directly affect a firm's market value and the value relevance of accounting information.

Date: 2013
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Citations: View citations in EconPapers (5)

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DOI: 10.1080/16081625.2013.765026

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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