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Paper

Paper Name    Does Internal Control over Financial Reporting Really Alleviate Agency Conflicts?
Author    Baolei Qi, Liuchuang Li, Qing Zhou, Jinghui Sun
Publication/Completion Time    2017-12-28
Magazine Name    Accounting & Finance
Vol    57 (4)
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Paper description    This study investigates whether internal control over financial reporting (ICFR) alleviates the managerial expropriation of corporate resources. We do this by examining the potential effects of material weaknesses in internal control on the values of corporate cash holdings and capital expenditures. Our findings suggest that ICFR facilitates the scrutiny and discipline of capital markets and thus alleviates the agency problems. Our results support the premise that high financial reporting quality impairs managers’ abilities to use corporate resources in a self-serving manner.
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