THE RELATIONSHIP BETWEEN FIRM CHARACTERISTICS AND VOLUNTARY INCLUSION OF EFFECTIVE INTERNAL CONTROLS STATEMENTS IN FRANCE: EMPIRICAL STUDY

Guy McClain
Millsaps College

Adel Beldi
IÉSEG School of Management

ABSTRACT

This study provides evidence on the nature of voluntary statements, on the effectiveness of internal controls (SEIC) and how impacted by the characteristics of firms issuing such reports. Using the recent French Financial Securities Act, which requires a chairmen’s report on internal controls, but no SEIC, the study examines the relationship between firm characteristics and the voluntary inclusion of an SEIC in the chairman’s report. Utilizing a sample consisting of 146 French listed firms (no U.S. cross-listed firms), the results of this study indicate that a voluntary SEIC is more likely for firms that have boards that meet more often, have more independent audit committees, have larger audit committees and are experiencing increasing sales growth. It was also found that inclusion of a voluntary SEIC in the chairman’s report is not impacted by overall board independence, board size, CEO duality, firm size, large shareholders, or firm leverage.

Keywords: Voluntary statements, firm characteristics, internal control, effectiveness, France