New Evidence on the Determinants of Internal Control Weaknesses

Document Type : Original Article


1 Department of Accounting, Payame Noor University, Tehran, Iran

2 Department of Accounting, Zanjan Branch, Islamic Azad University, Zanjan, Iran


The present study evaluates whether there is a significant relationship between investment, earnings management, ownership structure, and internal control weaknesses.
For the study purpose, panel data, including the financial variables of sample companies listed on the Tehran Stock Exchange, were evaluated during 2012-2018. To test the hypothesis, we analyzed the effect of seven descriptive variables on the dependent variable of internal control weakness; three models of Logit Pooled, LPM Pooled, and Probit Pooled are used for hypothesis testing.
The results showed a negative and significant relationship between board compensation, real earnings management, accrual earnings management, capital structure, family ownership, and internal control weakness. Moreover, a positive and meaningful relationship was discovered between institutional ownership and internal control weaknesses.
The current study's outcomes significantly show the relationship between internal control weaknesses, investment, earnings management, and firm ownership in a developing country.


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