Internal Control and the Insider versus Outsider CEO Choice

IF 1.4 Q3 BUSINESS, FINANCE

Journal of Management Accounting Research Pub Date : 2023-05-31 DOI:10.2308/jmar-2021-022

Leah M. Baer, Inder K. Khurana, Hoyoun Kyung

引用次数: 0

Abstract

We examine whether the quality of a firm’s internal controls affects a board’s decision to hire an insider as CEO. We find that the board is less likely to select an insider as CEO following an internal control material weakness (ICMW) disclosure. In cross-sectional analyses, we find that the adverse effect of weak internal controls on the likelihood of hiring an insider CEO is attenuated for firms that restate past misstatements and is pronounced when boards are more independent. We also find that audit fees are lower for ICMW firms when an outsider CEO is appointed, indicating that external auditors perceive lower audit risk. Taken together, our findings suggest that in the presence of a weak internal control environment, the board prefers an outsider CEO over an insider who may have been a part of the internal control issues, notwithstanding the fact that evaluating the outsider CEO can be challenging.

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内部控制与内部人与外部人CEO的选择

我们考察了公司内部控制的质量是否会影响董事会聘请内部人士担任首席执行官的决定。我们发现，在内部控制重大弱点（ICMW）披露后，董事会不太可能选择内部人士担任首席执行官。在横断面分析中，我们发现，对于重述过去错误陈述的公司来说，内部控制薄弱对聘请内部首席执行官的可能性的不利影响会减弱，当董事会更加独立时，这种影响会更加明显。我们还发现，当任命外部首席执行官时，ICMW公司的审计费用较低，这表明外部审计师认为审计风险较低。总之，我们的调查结果表明，在内部控制环境薄弱的情况下，董事会更喜欢外部CEO，而不是可能参与内部控制问题的内部人员，尽管评估外部CEO可能具有挑战性。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Management Accounting Research BUSINESS, FINANCE-

CiteScore

2.90

自引率

5.90%

发文量

期刊介绍： The mission of the Journal of Management Accounting Research (JMAR) is to advance the theory and practice of management accounting through publication of high-quality applied and theoretical research, using any well-executed research method. JMAR serves the global community of scholars and practitioners whose work impacts or is informed by the role that accounting information plays in decision-making and performance measurement within organizations. Settings may include profit and not-for profit organizations, service, retail and manufacturing organizations and domestic, foreign, and multinational firms. JMAR furthermore seeks to advance an understanding of management accounting in its broader context, such as issues related to the interface between internal and external reporting or taxation. New theories, topical areas, and research methods, as well as original research with novel implications to improve practice and disseminate the best managerial accounting practices are encouraged.