Firm's Operational Characteristics and Internal Control Structure Effectiveness in Business Inflationary Environment: An Empirical Study on Non-Financial Firms Listed in the Egyptian Stock Exchange

Khalil, Hoda M. A; Ali, Abd Elwahab N; Zaki, Noha M

doi:10.21608/masf.2024.374396

Firm's Operational Characteristics and Internal Control Structure Effectiveness in Business Inflationary Environment: An Empirical Study on Non-Financial Firms Listed in the Egyptian Stock Exchange

نوع المستند : المقالة الأصلية

المؤلفون

¹ Teaching assistant, Department of Accounting and Auditing, Faculty of Commerce, Alexandria University

² Professor, Department of Accounting and Auditing, Faculty of Commerce, Alexandria University; E- mail

³ Associate, Department of Accounting and Auditing, Faculty of Commerce, Alexandria University

10.21608/masf.2024.374396

المستخلص

This research delves into the influence of a firm's operational characteristics on the effectiveness of its internal control structure in business inflationary environment. The research hypothesis was tested employing multiple regression analysis, drawing upon data from 103 non-financial firms listed on the Egyptian Stock Exchange between 2016 and 2021, using content analyses of these firms. Primary findings indicate a significant positive relation between the firm’s operational characteristics and the effectiveness of the internal control structure. Subsequent analyses revealed that introducing control variables, notably accounting complexity, the nature of ownership (family vs. non-family), and the year, substantially bolstered these relationships. This underscores the aptness of the chosen variables in examining the relationships in question. Recognizing the crucial role of the internal control structure, which serves as a managerial mechanism ensuring accurate financial reporting, operational effectiveness, and adherence to relevant laws and regulations, it becomes imperative to identify the determinants shaping its functionality. Prominent among these determinants are the operational characteristics of the firm. This study evaluates the effect of four specific operational characteristics: firm size, firm age, advantage, and sales growth on the effectiveness of the internal control structure. The effectiveness of this structure was gauged using an index based on the COSO (2013) Framework. The paper’s original contribution lies in focusing on how internal control structure and its effectiveness in firms are important, and that is through developing an index, compatible with the Egyptian business environment, based on the COSO (2013) Framework.

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