The Effect of Employee Treatment Policies on Internal Control Weaknesses and Financial Restatements

• 成果类型: Article
• 署名作者: Guo, Jun; Huang, Pinghsun; Zhang, Yan; Zhou, Nan
• 署名单位: Rutgers University System; Rutgers University Camden; Rutgers University New Brunswick; National Cheng Kung University; State University of New York (SUNY) System; Binghamton University, SUNY
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-51269
• 发表日期: 2016
• 页码: 1167-1194
• 关键词: CORPORATE GOVERNANCE; director characteristics; control deficiencies; Managerial ability; BUSINESS STRATEGY; capital structure; propensity score; Audit committee; AGENCY COSTS; determinants

摘要

This study investigates the role of employment policies in reducing internal control ineffectiveness and financial restatements. We provide new evidence that employee treatment policies are an important predictor of ineffective internal control. We also find that employee-friendly policies significantly reduce the propensity for employee-related material weaknesses. These results suggest that greater employee benefits facilitate the acquisition, development, and motivation of the workforce and ameliorate the loss of valuable human capital, thereby mitigating employee failures to implement internal control tasks properly. Moreover, we document novel results that financial restatements, especially those caused by unintentional errors, are less likely to arise in firms that invest more in employee benefits. Collectively, our emphasis on the effect of employee treatment policies on the integrity of internal control and financial reporting distinguishes our paper from previous studies that focus on the role of top executives in accounting practices.