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EXPLORING THE EFFECT OF BUSINESS PERFORMANCE ON SMALL AND MICRO ENTERPRISES TO ESTABLISH AN INTERNAL CONTROL COMMITTEE: A BINARY LOGISTIC REGRESSION MODEL

Year 2017, Volume: 39 Issue: 2, 475 - 488, 24.12.2017
https://doi.org/10.14780/muiibd.384141

Abstract

This study examines how business performance affects small and micro enterprises’ decision on establishing an internal control committee. By observing a sample of 186 small and micro firms in Turkey, we test the claim that small and micro enterprises’ financial problems obstruct establishing an internal control committee. We measure business performance by financial and non-financial indicators obtained from sample firms’ accounting reports and information system. Then, the effect of business performance on establishing an internal control committee is studied by a binary logistic regression analysis. As a result of the analysis it is explored that there was a statistically significant positive effect of business performance on “establishing an internal control committee” decision and the claim that financial problems obstruct establishing an internal control committee is verified.

References

  • ASHBAUGH-SKAIFE, Hollis., Collins, Daniel W., Kinney, JR, William., Lafond Ryan (2009). The Effect of SOX Internal Control Deficiencies On Firm Risk And Cost of Equity, Journal of Accounting Research, 47(1), s.1-43.
  • AYYAGARI, Meghana., Demirgüç-Kunt, Aslı., Maksimovic, Vojislav (2011). Small vs. Young Firms Across The World, Policy Research Working Paper, s. 5631.
  • BRAH, Shaukat. A., Tee, Serene S.L., Madhu Rao (2000). TQM and Business Performance in the Service Sector: A Singapore Study, International Journal of Operations & Production Management, 20(11), s. 1293-1312.
  • CHAMBERS, Andrew (1987). International Auditing, United Kingdom.
  • CHANGCHIT, Chuleeporn., Holsapple, Clyde., Madden, Donald (2001). Supporting Managers’ Internal Control Evaluations: An Expert System and Experimental Results, Decision Support Systems, 30(4), s. 437-449
  • COSO (2017). https://www.coso.org/Documents/990025P-Executive-Summary-final-may20.pdf , Access Date (15.10.2017).
  • DOYLE, Jeffrey., Ge, Weili., McVay, Sarah (2007). Accruals Quality and Internal Control Over Financial Reporting, The Accounting Review, 82(5), s. 1141-1170.
  • DUTTA, Prajit K., Radner, Roy (1999). Profit Maximization and The Market Selection Hypothesis, The Review of Economic Studies, 66(4), s. 769-798.
  • FADZIL, Faudziah., Haron, Hasnah., Jantan, Muhamad (2005). Internal Auditing Practices and Internal Control System, Managerial Auditing Journal, 20(8), s. 844-866.
  • FOSTER, Benjamin P., William Ornstein., Trimbak Shastri (2007). Audit Costs, Material Weaknesses Under SOX Section 404, Managerial Auditing Journal, 22(7), s. 661-673.
  • GONZÁLEZ-BENITO, Óscar., González-Benito, Javier (2005). Cultural vs. operational market orientation and objective vs. subjective performance: Perspective of production and operations, Industrial marketing management, 34(8), s. 797-829.
  • HABIB Mohammed M., Victor, Bart (1991). Strategy, Structure, and Performance of Us Manufacturing and Service Mncs: A Comparative Analysis, Strategic Management Journal, 12(8), s. 589-606.
  • JIANG, Linjie., Li, Xuedong (2010). Discussions on the Improvement of the Internal Control in SMEs, International Journal of Business and Management, 5(9), s. 214-216.
  • JOKIPII, Annukka (2010). Determinants and Consequences of Internal Control In Firms: A Contingency Theory Based Analysis, Journal of Management & Governance, 14(2), s. 115-144.
  • KINNEY Jr, William R. (2001). Accounting Scholarship: What Is Uniquely Ours?, The Accounting Review, 76(2), s. 275-284.
  • KOSGEB (2012). Enhancing the Competitiveness of SMEs In Turkey Country Report, KOSGEB, Ankara.
  • LEE, Jim (2009). Does Size Matter In Firm Performance? Evidence From US Public Firms, International Journal of the Economics of Business, 16(2), s. 189-203.
  • MARCHETTI, Anne M (2005). Beyond Sarbanes-Oxley Compliance: Effective Enterprise Risk Management, New Jersey: John Wiley and Sons, Inc.
  • MORRIS, John J. (2011). The Impact of Enterprise Resource Planning (ERP) Systems On The Effectiveness Of Internal Controls Over Financial Reporting, Journal of Information Systems, 25(1), s. 129-157.
  • NEW STRAITS TIMES (2012). Let Internal Auditors Sit in at High-Level Meetings, 0ct 24 issues.
  • PAPADOGONAS, Theodore A. (2006). The Financial Performance of Large and Small Firms: Evidence From Greece, International Journal of Financial Services Management, 2(1-2), s. 14-20.
  • SGARDEA, Florinel Marian (2009). Risk Management and The Internal Control Systems Promoted by COSO In The Context of Financial Crisis, Metalurgia International, 15, s. 53-56.
  • SUNDGREN, Stefan., Svanström, Tobias (2013). Audit Office Size, Audit Quality And Audit Pricing: Evidence From Small – and Medium-Sized Enterprises, Accounting and Business Research, 43(1), s. 31-55.
  • SULAIMAN, Maliah., Siraj, Siti Alawiah., Ibrahim, S. H. Mohamed (2008). Internal Control Systems in West Malaysia’s State Mosques, American Journal of Islamic Social Sciences, 25(1), s. 63.
  • SNYDER, Neil H., Broome, O. Whitfield., Zimmerman, Karen (1989). Using Internal Controls to Reduce Employee Theft in Small Businesses, Journal Of Small Business Management, 27(3), s. 48.
  • TEPAV (2017) http://www.tepav.org.tr/tr/haberler/s/3978, Access date (15.09.2017).
  • UZUN, Ali Kamil (2009). The Role of Internal Audit in Internal Control Quality in Corporate Organizations, 3rd International Symposium on Auditing in Turkey, Istanbul, 12-13 October.
  • WANG, Mao Chang., Lee, Meng Han., Chuang, Jia Jiann (2016). Relations Among Audit Committee Establishment, Information Transparency and Earnings Quality: Evidence From Simultaneous Equation Models, Quality & Quantity, 50(6), s. 2417-2431.
  • WORLD BANK (2008). Finance For All? A World Bank Policy Research Report, Washington.
  • YILDIRIM, Hakan., İnel, Mehmet(2012). Muhasebe Denetiminde Örnekleme Tekniklerinin Değerlendirilmesi Üzerine Bir İnceleme, İktisadi ve İdari Bilimler Dergisi, 32(1), s. 261-276.
Year 2017, Volume: 39 Issue: 2, 475 - 488, 24.12.2017
https://doi.org/10.14780/muiibd.384141

Abstract

References

  • ASHBAUGH-SKAIFE, Hollis., Collins, Daniel W., Kinney, JR, William., Lafond Ryan (2009). The Effect of SOX Internal Control Deficiencies On Firm Risk And Cost of Equity, Journal of Accounting Research, 47(1), s.1-43.
  • AYYAGARI, Meghana., Demirgüç-Kunt, Aslı., Maksimovic, Vojislav (2011). Small vs. Young Firms Across The World, Policy Research Working Paper, s. 5631.
  • BRAH, Shaukat. A., Tee, Serene S.L., Madhu Rao (2000). TQM and Business Performance in the Service Sector: A Singapore Study, International Journal of Operations & Production Management, 20(11), s. 1293-1312.
  • CHAMBERS, Andrew (1987). International Auditing, United Kingdom.
  • CHANGCHIT, Chuleeporn., Holsapple, Clyde., Madden, Donald (2001). Supporting Managers’ Internal Control Evaluations: An Expert System and Experimental Results, Decision Support Systems, 30(4), s. 437-449
  • COSO (2017). https://www.coso.org/Documents/990025P-Executive-Summary-final-may20.pdf , Access Date (15.10.2017).
  • DOYLE, Jeffrey., Ge, Weili., McVay, Sarah (2007). Accruals Quality and Internal Control Over Financial Reporting, The Accounting Review, 82(5), s. 1141-1170.
  • DUTTA, Prajit K., Radner, Roy (1999). Profit Maximization and The Market Selection Hypothesis, The Review of Economic Studies, 66(4), s. 769-798.
  • FADZIL, Faudziah., Haron, Hasnah., Jantan, Muhamad (2005). Internal Auditing Practices and Internal Control System, Managerial Auditing Journal, 20(8), s. 844-866.
  • FOSTER, Benjamin P., William Ornstein., Trimbak Shastri (2007). Audit Costs, Material Weaknesses Under SOX Section 404, Managerial Auditing Journal, 22(7), s. 661-673.
  • GONZÁLEZ-BENITO, Óscar., González-Benito, Javier (2005). Cultural vs. operational market orientation and objective vs. subjective performance: Perspective of production and operations, Industrial marketing management, 34(8), s. 797-829.
  • HABIB Mohammed M., Victor, Bart (1991). Strategy, Structure, and Performance of Us Manufacturing and Service Mncs: A Comparative Analysis, Strategic Management Journal, 12(8), s. 589-606.
  • JIANG, Linjie., Li, Xuedong (2010). Discussions on the Improvement of the Internal Control in SMEs, International Journal of Business and Management, 5(9), s. 214-216.
  • JOKIPII, Annukka (2010). Determinants and Consequences of Internal Control In Firms: A Contingency Theory Based Analysis, Journal of Management & Governance, 14(2), s. 115-144.
  • KINNEY Jr, William R. (2001). Accounting Scholarship: What Is Uniquely Ours?, The Accounting Review, 76(2), s. 275-284.
  • KOSGEB (2012). Enhancing the Competitiveness of SMEs In Turkey Country Report, KOSGEB, Ankara.
  • LEE, Jim (2009). Does Size Matter In Firm Performance? Evidence From US Public Firms, International Journal of the Economics of Business, 16(2), s. 189-203.
  • MARCHETTI, Anne M (2005). Beyond Sarbanes-Oxley Compliance: Effective Enterprise Risk Management, New Jersey: John Wiley and Sons, Inc.
  • MORRIS, John J. (2011). The Impact of Enterprise Resource Planning (ERP) Systems On The Effectiveness Of Internal Controls Over Financial Reporting, Journal of Information Systems, 25(1), s. 129-157.
  • NEW STRAITS TIMES (2012). Let Internal Auditors Sit in at High-Level Meetings, 0ct 24 issues.
  • PAPADOGONAS, Theodore A. (2006). The Financial Performance of Large and Small Firms: Evidence From Greece, International Journal of Financial Services Management, 2(1-2), s. 14-20.
  • SGARDEA, Florinel Marian (2009). Risk Management and The Internal Control Systems Promoted by COSO In The Context of Financial Crisis, Metalurgia International, 15, s. 53-56.
  • SUNDGREN, Stefan., Svanström, Tobias (2013). Audit Office Size, Audit Quality And Audit Pricing: Evidence From Small – and Medium-Sized Enterprises, Accounting and Business Research, 43(1), s. 31-55.
  • SULAIMAN, Maliah., Siraj, Siti Alawiah., Ibrahim, S. H. Mohamed (2008). Internal Control Systems in West Malaysia’s State Mosques, American Journal of Islamic Social Sciences, 25(1), s. 63.
  • SNYDER, Neil H., Broome, O. Whitfield., Zimmerman, Karen (1989). Using Internal Controls to Reduce Employee Theft in Small Businesses, Journal Of Small Business Management, 27(3), s. 48.
  • TEPAV (2017) http://www.tepav.org.tr/tr/haberler/s/3978, Access date (15.09.2017).
  • UZUN, Ali Kamil (2009). The Role of Internal Audit in Internal Control Quality in Corporate Organizations, 3rd International Symposium on Auditing in Turkey, Istanbul, 12-13 October.
  • WANG, Mao Chang., Lee, Meng Han., Chuang, Jia Jiann (2016). Relations Among Audit Committee Establishment, Information Transparency and Earnings Quality: Evidence From Simultaneous Equation Models, Quality & Quantity, 50(6), s. 2417-2431.
  • WORLD BANK (2008). Finance For All? A World Bank Policy Research Report, Washington.
  • YILDIRIM, Hakan., İnel, Mehmet(2012). Muhasebe Denetiminde Örnekleme Tekniklerinin Değerlendirilmesi Üzerine Bir İnceleme, İktisadi ve İdari Bilimler Dergisi, 32(1), s. 261-276.
There are 30 citations in total.

Details

Subjects Economics
Journal Section Makaleler
Authors

Atilla Büyükçoban This is me

Gülümser Ünkaya

Tuğba Altıntaş

Publication Date December 24, 2017
Submission Date September 1, 2017
Published in Issue Year 2017 Volume: 39 Issue: 2

Cite

APA Büyükçoban, A., Ünkaya, G., & Altıntaş, T. (2017). EXPLORING THE EFFECT OF BUSINESS PERFORMANCE ON SMALL AND MICRO ENTERPRISES TO ESTABLISH AN INTERNAL CONTROL COMMITTEE: A BINARY LOGISTIC REGRESSION MODEL. Marmara Üniversitesi İktisadi Ve İdari Bilimler Dergisi, 39(2), 475-488. https://doi.org/10.14780/muiibd.384141
AMA Büyükçoban A, Ünkaya G, Altıntaş T. EXPLORING THE EFFECT OF BUSINESS PERFORMANCE ON SMALL AND MICRO ENTERPRISES TO ESTABLISH AN INTERNAL CONTROL COMMITTEE: A BINARY LOGISTIC REGRESSION MODEL. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi. December 2017;39(2):475-488. doi:10.14780/muiibd.384141
Chicago Büyükçoban, Atilla, Gülümser Ünkaya, and Tuğba Altıntaş. “EXPLORING THE EFFECT OF BUSINESS PERFORMANCE ON SMALL AND MICRO ENTERPRISES TO ESTABLISH AN INTERNAL CONTROL COMMITTEE: A BINARY LOGISTIC REGRESSION MODEL”. Marmara Üniversitesi İktisadi Ve İdari Bilimler Dergisi 39, no. 2 (December 2017): 475-88. https://doi.org/10.14780/muiibd.384141.
EndNote Büyükçoban A, Ünkaya G, Altıntaş T (December 1, 2017) EXPLORING THE EFFECT OF BUSINESS PERFORMANCE ON SMALL AND MICRO ENTERPRISES TO ESTABLISH AN INTERNAL CONTROL COMMITTEE: A BINARY LOGISTIC REGRESSION MODEL. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi 39 2 475–488.
IEEE A. Büyükçoban, G. Ünkaya, and T. Altıntaş, “EXPLORING THE EFFECT OF BUSINESS PERFORMANCE ON SMALL AND MICRO ENTERPRISES TO ESTABLISH AN INTERNAL CONTROL COMMITTEE: A BINARY LOGISTIC REGRESSION MODEL”, Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi, vol. 39, no. 2, pp. 475–488, 2017, doi: 10.14780/muiibd.384141.
ISNAD Büyükçoban, Atilla et al. “EXPLORING THE EFFECT OF BUSINESS PERFORMANCE ON SMALL AND MICRO ENTERPRISES TO ESTABLISH AN INTERNAL CONTROL COMMITTEE: A BINARY LOGISTIC REGRESSION MODEL”. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi 39/2 (December 2017), 475-488. https://doi.org/10.14780/muiibd.384141.
JAMA Büyükçoban A, Ünkaya G, Altıntaş T. EXPLORING THE EFFECT OF BUSINESS PERFORMANCE ON SMALL AND MICRO ENTERPRISES TO ESTABLISH AN INTERNAL CONTROL COMMITTEE: A BINARY LOGISTIC REGRESSION MODEL. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi. 2017;39:475–488.
MLA Büyükçoban, Atilla et al. “EXPLORING THE EFFECT OF BUSINESS PERFORMANCE ON SMALL AND MICRO ENTERPRISES TO ESTABLISH AN INTERNAL CONTROL COMMITTEE: A BINARY LOGISTIC REGRESSION MODEL”. Marmara Üniversitesi İktisadi Ve İdari Bilimler Dergisi, vol. 39, no. 2, 2017, pp. 475-88, doi:10.14780/muiibd.384141.
Vancouver Büyükçoban A, Ünkaya G, Altıntaş T. EXPLORING THE EFFECT OF BUSINESS PERFORMANCE ON SMALL AND MICRO ENTERPRISES TO ESTABLISH AN INTERNAL CONTROL COMMITTEE: A BINARY LOGISTIC REGRESSION MODEL. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi. 2017;39(2):475-88.

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