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The influence of qualified foreign institutional investors on internal control quality: Evidence from China

Zhe Li Orcid Logo, Bo Wang, Tianlong Wu, Dan Zhou

International Review of Financial Analysis, Volume: 78, Start page: 101916

Swansea University Author: Zhe Li Orcid Logo

  • Accepted Manuscript under embargo until: 25th April 2023

Abstract

This study aims to investigate whether qualified foreign institutional investors (QFIIs) improve companies’ internal control quality to mitigate information asymmetry. By analysing a sample of 22,310 firm-year observations from Chinese listed companies between 2005 and 2017, we found that companies...

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Published in: International Review of Financial Analysis
ISSN: 1057-5219 1057-5219
Published: Elsevier BV 2021
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URI: https://cronfa.swan.ac.uk/Record/cronfa58458
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first_indexed 2021-10-25T11:18:12Z
last_indexed 2021-12-14T04:27:59Z
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spelling 2021-12-13T12:34:29.2162135 v2 58458 2021-10-25 The influence of qualified foreign institutional investors on internal control quality: Evidence from China c597db9f314a168667e3e40d5778db9c 0000-0003-1442-4499 Zhe Li Zhe Li true false 2021-10-25 BAF This study aims to investigate whether qualified foreign institutional investors (QFIIs) improve companies’ internal control quality to mitigate information asymmetry. By analysing a sample of 22,310 firm-year observations from Chinese listed companies between 2005 and 2017, we found that companies with QFIIs exhibit higher internal control quality and fewer internal control deficiencies. In particular, higher QFII ownership is associated with higher quality of internal control. Interestingly, QFIIs from high-governance-quality countries are more likely to improve the internal control system of their investee companies. Finally, the improvement in internal control quality attributed to QFIIs leads to better operating performance. Our results are robust to alternative measures of QFIIs, alternative proxies for internal control quality, and various controls for endogeneity issues. Patent / published patent application International Review of Financial Analysis 78 101916 Elsevier BV 1057-5219 1057-5219 Qualified foreign institutional investors; internal control quality; Chinese equity markets; information asymmetry 1 11 2021 2021-11-01 10.1016/j.irfa.2021.101916 COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University 2021-12-13T12:34:29.2162135 2021-10-25T11:58:51.7866164 School of Management Accounting and Finance Zhe Li 0000-0003-1442-4499 1 Bo Wang 2 Tianlong Wu 3 Dan Zhou 4 Under embargo Under embargo 2021-10-25T18:59:39.7829264 Output 619185 application/pdf Accepted Manuscript true 2023-04-25T00:00:00.0000000 ©2021 All rights reserved. All article content, except where otherwise noted, is licensed under a Creative Commons Attribution Non-Commercial No Derivatives License (CC-BY-NC-ND) true eng https://creativecommons.org/licenses/by-nc-nd/4.0/
title The influence of qualified foreign institutional investors on internal control quality: Evidence from China
spellingShingle The influence of qualified foreign institutional investors on internal control quality: Evidence from China
Zhe Li
title_short The influence of qualified foreign institutional investors on internal control quality: Evidence from China
title_full The influence of qualified foreign institutional investors on internal control quality: Evidence from China
title_fullStr The influence of qualified foreign institutional investors on internal control quality: Evidence from China
title_full_unstemmed The influence of qualified foreign institutional investors on internal control quality: Evidence from China
title_sort The influence of qualified foreign institutional investors on internal control quality: Evidence from China
author_id_str_mv c597db9f314a168667e3e40d5778db9c
author_id_fullname_str_mv c597db9f314a168667e3e40d5778db9c_***_Zhe Li
author Zhe Li
author2 Zhe Li
Bo Wang
Tianlong Wu
Dan Zhou
format Patent
container_title International Review of Financial Analysis
container_volume 78
container_start_page 101916
publishDate 2021
institution Swansea University
issn 1057-5219
1057-5219
doi_str_mv 10.1016/j.irfa.2021.101916
publisher Elsevier BV
college_str School of Management
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hierarchy_top_id schoolofmanagement
hierarchy_top_title School of Management
hierarchy_parent_id schoolofmanagement
hierarchy_parent_title School of Management
department_str Accounting and Finance{{{_:::_}}}School of Management{{{_:::_}}}Accounting and Finance
document_store_str 0
active_str 0
description This study aims to investigate whether qualified foreign institutional investors (QFIIs) improve companies’ internal control quality to mitigate information asymmetry. By analysing a sample of 22,310 firm-year observations from Chinese listed companies between 2005 and 2017, we found that companies with QFIIs exhibit higher internal control quality and fewer internal control deficiencies. In particular, higher QFII ownership is associated with higher quality of internal control. Interestingly, QFIIs from high-governance-quality countries are more likely to improve the internal control system of their investee companies. Finally, the improvement in internal control quality attributed to QFIIs leads to better operating performance. Our results are robust to alternative measures of QFIIs, alternative proxies for internal control quality, and various controls for endogeneity issues.
published_date 2021-11-01T04:15:10Z
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score 10.887993