Internal Control and Nonprofit Organizations' Efficiency: Evidence from China
Posted: 5 Feb 2015
Date Written: February 4, 2015
Abstract
Using a sample of 6,771 Chinese public charities from 2005 to 2012, we investigate the role of internal control quality on nonprofit organizations’ operating efficiency. We present evidence that internal control weakness and remediation of internal control deficiencies are positively related to operating efficiency measured as funds received from donors and fund usage efficiency by managers. Further analyses indicate that the role of internal control quality in efficiency is more significant for non-restricted donations, private fund-raising foundations, and local charities. Overall, our study extends the literature of internal control quality of nonprofit organizations by providing evidence of the effects of internal control on operational efficiency in a government-oriented environment.
Keywords: internal control deficiencies, internal control remediation, nonprofit organization, operational efficiency, emerging market
JEL Classification: M41, L31
Suggested Citation: Suggested Citation