The Role of Internal Control in Firm’s Sustainable Growth: Evidence from China

Abstract

The study examines whether internal control indeed plays a role in firm’s sustainable growth, particularly conditional on different institutional environments. Using a large sample of the listed firms in China, we find that effective internal control positively contributes to firm’s sustainable growth, and the effect is manifested in well-developed institutional environments. These results are robust to a battery of sensitivity tests, including control for Endogeneity, and alternative proxies for sustainable growth, internal control, and institutional environment. This study extends the literature by providing empirical evidence on the governance role of internal control in firm’s sustainable growth.