The Effect of Internal Controls on Operational Efficiency: Evidence from Manufacturing Firms
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December 2, 2024The Effect of Internal Controls on Operational Efficiency: Evidence from Manufacturing Firms
ABSTRACT: The COSO framework and several academic theories and practices from management and operations highlights the positive impact of effective internal control systems on operational performance. Using internal control deficiencies as indicators of ineffective control systems and employing propensity score matching, this study demonstrates that improvements in internal control quality are positively associated with enhanced operational efficiency in manufacturing firms, as measured through data envelopment analysis. These findings contribute to the ongoing debate regarding the organizational impacts of the Sarbanes-Oxley Act (SOX).
KEYWORDS: Internal Controls, Manufacturing, Operational Efficiency, SOX,