Internal Quality Control Research Articles

Digital transformation and environmental, social, and governance greenwashing: Evidence from China

This paper examines the relationship between digital transformation(DT) and environmental, social, and governance(ESG) greenwashing using Chinese listed companies as a sample from 2012 to 2022. Furthermore, it analyzes the enterprise and regional heterogeneity as well as the influencing mechanisms on this relationship. The research results indicate that corporate digital transformation significantly inhibits ESG greenwashing, with a more pronounced effect on companies in non-high-pollution industries, high-tech industries, and the eastern region. In addition, mechanism tests reveal that internal control and financing constraints play a partial mediating role. Digital transformation suppresses ESG greenwashing by enhancing the quality of internal control and alleviating financing constraints. The primary contribution of this paper lies in demonstrating that digital transformation can serve as a strategic tool to mitigate ESG greenwashing. This enriches the research on the outcomes of digital transformation as well as the factors influencing ESG greenwashing. The conclusions of this paper provide theoretical foundations and policy recommendations for better ESG development by enterprises and governments in emerging markets. At the same time, this paper has a certain guiding role for the introduction and implementation of policies to encourage digital transformation.

Cities’ labor administrative penalties and labor income share of enterprises

The labor administrative penalties of a city are enforced by the city's labor security administrative department for any breaches of labor security laws, regulations, or norms. The severity of labor administrative penalties differs across cities; thus, this study aims to determine how a city's penalties affect the labor income share of enterprises. We conduct a practical investigation to examine the influence of labor administrative penalties imposed by cities on the internal income distribution structure of firms. This study utilizes theoretical analysis and data on labor administrative penalties in Chinese cities, as well as samples of A-share listed businesses in Shanghai and Shenzhen. From the perspective of the internal income distribution structure, we examine the labor income share of firms and discover that labor administrative penalties in cities significantly raise the labor income share of these enterprises. The share of labor income of enterprises registered in the city increases by 0.9707 % for each additional unit of cities' labor administrative penalties (i.e., for a one-time labor administrative penalty per 10,000 people). The conclusion remains valid even after excluding the endogeneity and robustness tests. Regional labor administrative penalties can enhance the internal management of enterprise quality by promoting transparency and deterring non-compliance. This, in turn, mitigates credit risk for enterprises by fostering stable labor relations. Enhancing the quality of internal control and mitigating credit risk can lead to an increase in the labor income share of firms. An analysis of heterogeneity shows that the impact of labor administrative penalties in cities on increasing the percentage of labor income varies. The impact is more pronounced for state-owned firms and enterprises with low levels of investment.

Establishment and evaluation of Voting algorithm-based internal quality control (ViQC), a patient-based real-time quality control

BackgroundPatient-Based Real-Time Quality Control (PBRTQC) has emerged as a supplementary programme to traditional internal quality control (iQC) mechanisms. Despite its growing popularity, practical applications in clinical settings reveal several challenges. The primary objective of this research is to introduce and develop an Artificial Intelligence (AI)-based method, named Voting algorithm based iQC (ViQC), designed to enhance the precision and reliability of existing PBRTQC systems. MethodsIn this study, we conducted a retrospective analysis of 111,925 inpatient serum glucose test results from Nanjing Drum Tower Hospital, Nanjing, China, to provide an unbiased data set. The Voting iQC (ViQC) algorithm, established by the principles of the Voting algorithm, was then developed. Its analytical performance was evaluated through the calculation of random errors (RE). Subsequently, its clinical efficacy was assessed by comparison with five statistical algorithms: Moving Average (MA), Exponentially Weighted Moving Average (EWMA), Moving Median (movMed, MM), Moving Quartile (MQ), and Moving Standard Deviation (MovSD). ResultsThe ViQC model incorporates a variety of machine learning models, including logistic regression, Bayesian methods, K-Nearest Neighbor, decision trees, random forests, and gradient boosting decision trees, to establish a robust predictive framework. This model consistently maintains a false positive rate below 0.002 across all six evaluated error factors, showcasing exceptional precision. Notably, its performance further excels with an error factor of 3.0, where the false positive rate drops below 0.001, and achieves an accuracy rate as high as 0.965 at an error factor of 2.0. The classification effectiveness of ViQC model is evaluated by an area under the curve (AUC) exceeding 0.97 for all error factors. In comparison to five conventional PBRTQC statistical methods, ViQC significantly enhances error detection efficiency, maximum reducing the trimmed average number of patient samples required for detecting errors from 724 to 168, thereby affirming its superior error detection capability. ConclusionThe new established PBRTQC using artificial intelligence yielded satisfactory performance compared to the traditional PBBTQC in real world setting.

Digital Transformation and Non-Financial Performance in Manufacturing

In the context of the digital economy era, can digital transformation promote the improvement of non-financial performance of manufacturing enterprises? Taking Shanghai and Shenzhen A-share listed manufacturing firms from 2012 to 2021 as instances, this paper decomposes non-financial performance from five dimensions: innovation performance, ESG performance, working capital management performance, organizational resilience, and corporate market competitiveness, and examines the effects and mechanisms of the digital revolution on manufacturing companies’ non-financial performance via empirical analysis. The findings are as follows: (1) digital transformation of manufacturing enterprises plays a significant positive role in innovation performance, ESG performance, working capital management performance, organizational resilience, and corporate market competitiveness, and (2) digital transformation can promote the improvement of non-financial performance of manufacturing enterprises by improving the quality of internal control. In addition, the heterogeneity analysis results show that digital transformation contributes more to the non-financial performance of non-state-owned manufacturing enterprises. The study conclusion can provide experience for promoting the sustainable development of manufacturing enterprises and driving high-quality economic development.

Quantification of C1 inhibitor activity using a chromogenic automated assay: analytical and clinical performances.

The quantification of functional C1 inhibitor activity (fC1-INH) is an important tool to diagnose bradykinin-mediated angioedema (AE), whether hereditary or acquired. For that an accurate assay is necessary, therefore we evaluated the analytical performances of a fC1-INH chromogenic assay (Berichrom®, Siemens) performed utilizing an Optilite turbidimeter (Binding Site). fC1-INH was quantified by means of the chromogenic assay Berichrom®. Internal quality controls were used to determine the precision of the assay. Stability under various storage and matrix conditions, uncertainty, linearity, interference (of hemolysis, lipemia, and icterus), agreement with the manual Technochrom® assay, and diagnostic performances were further evaluated on samples from patients and healthy donors. The fC1-INH Berichrom® assay presented good performances regarding intra- and inter-assay precision (CV: 1.3-4.5 % and 3.0-6.0 %, respectively), expanded uncertainty (5.5 % at normal level and 12.5 % at the clinical threshold) and linearity (rho2>0.99: range 7-130 % activity). Addition of interfering substances (hemoglobin <16 g/L, intralipid® <12 g/L, and bilirubin <1 g/L) did not affect fC1-INH quantification. fC1-INH activity from healthy donors remained stable in citrate whole blood until 4 days at room temperature, and 7 days when plasma was collected. Agreement between the automated Berichrom® assay and the manual Technochrom® assay (n=47) was excellent as obtained with both quantitative (Deming regression and Bland-Altman difference plot) and qualitative (Kappa index=1) analyses. Finally, the diagnostic performance of the quantification of fC1-INH for AE evaluated on 81 patients revealed a sensitivity of 100 %, a specificity of 97.2 %, a positive predictive value of 83.3 % and a negative predictive value of 100 %. The automated fC1-INH Berichrom® assay showed good performance, both at the analytical and diagnostic/clinical levels that allowed its usage in a clinical laboratory for C1-INH-dependent bradykinin-mediated AE research in combination with quantitative C1-INH and C4 determinations.

Dissecting the impact of the three E, S, G pillars on credit risk

This study explores the impact of Environmental, Social, and Governance (ESG) scores on the credit risk of Chinese A-share listed companies. Based on the empirical study, we analyse both the individual and combined effects of E, S, and G scores. Our findings indicate that improvements in ESG scores significantly reduce credit risk, particularly among green companies and those with high transparency. This conclusion remains robust after accounting for potential endogeneity bias through the application of the instrumental variable method. Furthermore, our study delves into how ESG scores impact credit risk. An increase in ESG scores reduces a company’s debt default risk by decreasing the negative ESG-related news sentiment, enhancing stock liquidity, lowering financing costs, and improving the quality of internal controls. These insights contribute to a deeper understanding of ESG factors in risk management and offer practical guidance for companies seeking to enhance their ESG performance in relation to credit risk.

Directors' and Officers' Liability Insurance and the Digital Transformation of Enterprises: Based on the Empirical Evidence of Listed Companies in China from 2011 to 2021

Amidst the wave of the digital economy, numerous enterprises have commenced the process of digital transformation to address market challenges and fluctuations, as well as to pursue sustainable growth. Directors' and officers' liability insurance (D&amp;O insurance), being an essential instrument of corporate governance, necessitates an empirical investigation to unravel its influence on enterprises' digital transformation. This study selects Shanghai-Shenzhen A-share listed companies from 2011 to 2021 as research subjects to examine the impact of D&amp;O insurance procurement on enterprises' digital transformation and its underlying mechanisms. The findings reveal that the procurement of D&amp;O insurance significantly fosters the progress of enterprise digital transformation, and this conclusion remains robust after employing a series of robustness tests, including the instrumental variable method and DIGT. The mechanism analysis indicates that by elevating the risk-bearing capacity of enterprise managers, the management efficiency of enterprises can be enhanced, thereby motivating supervisory executives to augment the quality of internal control and facilitate the digital transformation of enterprises. Further examination discloses that executive equity incentives and executive responsibility insurance possess complementary effects in promoting enterprise digital transformation, making the subscription of executive responsibility insurance a pivotal factor in enhancing the effectiveness of enterprise digital transformation and fostering high-quality economic development.

Internal control and stock liquidity

This paper examines the correlation between corporate internal control and stock liquidity by utilizing data from China's A-share listed companies spanning the period from 2012 to 2022. It is observed that a higher quality of internal control positively signals to the capital market, thereby enhancing the stock liquidity of the enterprise. Furthermore, compared to state-owned enterprises, earnings quality serves as a partial intermediary in the process where internal control influences stock liquidity. However, for non-state-owned enterprises, the improvement in the quality of internal control is more notably effective in augmenting stock liquidity.

Does social media attention influence audit reporting conservatism? Evidence from China

ABSTRACT Based on stock forum data of companies listed on the Shanghai and Shenzhen Stock Exchanges from 2009 to 2021, we examine whether and how companies’ social media attention affects audit reporting conservatism. We find that companies’ social media attention is positively related to audit reporting conservatism, and this positive association is more pronounced when auditors are geographically distant from their clients. Furthermore, we observe that the effect of social media attention on audit reporting conservatism is stronger for clients with lower information transparency, lower internal control quality, and higher client importance.

Does the Digital Transformation of an Organization Improve the Quality of Internal Controls?

Does the Digital Transformation of an Organization Improve the Quality of Internal Controls?

Does digital transformation drive enterprise green investment? Evidence from Chinese listed firms

This study aims to investigate the effect of enterprise digital transformation on green investment based on data from Chinese A-share listed enterprises from 2008 to 2021. The result suggests that enterprise digital transformation has a significant contribution to green investment, and this finding still holds after a series of robustness tests. Digital transformation promotes green investment by improving internal control quality, increasing information transparency and ESG performance. We further find that the differences in firm characteristics and external environment also make the impact of digital transformation on enterprise green investment varied. Specifically, the promotion effect of digital transformation on green investment is greater in enterprises with low financing constraints, low risk enterprises and enterprises in the growth stage, and also greater in regions with developed digital financial inclusion and high government support and strong environmental regulation. Our findings provide empirical insights for understanding how enterprises engage in environmental governance in the context of rapidly growing digital economy.

Foreign ownership, subjective willing, and internal control level

Foreign shareholders are essential in the capital market. The study on A-share listed firms from 2012 to 2021 examines the impact of foreign ownership on internal control and its transmission effect. Using text analysis and machine learning methods, we construct a variable named “internal control willingness” to explore the impact of subjective willingness. The findings indicate that foreign shareholding significantly enhances internal control quality, with a more pronounced effect observed in samples demonstrating a more positive internal control willingness. Moreover, foreign shareholders contribute to the invested firm's sustainable development by enhancing internal control quality. Further research demonstrates that the positive impact of foreign shareholding is more significant in firms with legal foreign shareholders, highly competitive industries, and sound legal environments. These findings can aid host country firms in more efficiently leveraging foreign resources and provide empirical evidence for opening up China's capital market and formulating foreign investment regulations.

The diagnostic accuracy of quality control rules

Internal quality control in clinical chemistry laboratories are based on analyzing samples of stable control materials among the patient samples. The control results are interpreted by using quality control rules that usually are designed to detect systematic errors. The best rules have a high probability of error detection (Ped), i.e. to detect the maximal allowable (critical) systematic error and a low probability of false rejection (Pfr, false alarm). In this work we show that quality control rules can be represented by points on a ROC curve which appears when Ped is plotted against Pfr and only the control limit is varied. Further, we introduce a new method for choosing the optimal control limit, analogous to choosing the optimal operating point on the ROC curve of a diagnostic test. This decision needs knowledge of the pretest probability of a critical systematic error, the benefit of detecting it when it occurs and the cost of false alarm. The ROC curve analysis showed that if rules based on N = 2 are used, mean rules outperform Westgard rules because the ROC curve of the mean rules was lying above the ROC curves of the Westgard rules. A mean rule also had a lower maximum expected increase in the number of unacceptable patient results reported during the presence of an out-of-control error condition (Max E(NUF)) than comparable Westgard rules.

Reducing asymmetric cost behaviors: Evidence from digital innovation

This study quantifies the impact of digital innovation on corporate performance, offering insights into the sustainability of digital innovation’s impact and providing guidance for firms embarking on their digital innovation journey. We examine the effect of digital innovation on cost stickiness using patent reports spanning from 2007 to 2022. The baseline analysis results reveal that digital innovation significantly mitigates cost stickiness in companies. This finding remains robust after addressing endogeneity concerns and conducting various robustness tests. We probe potential mechanisms and discover that digital innovation reduces cost stickiness by enhancing the quality of internal controls, improving resource-adjustment efficiency, and addressing managerial over-optimism. Heterogeneity analysis indicates a more pronounced impact of digital innovation on reducing asymmetric cost behaviors in larger firms, those beyond the growth stage, and in regions with active digital procurement, well-developed digital taxation governance, and sound judiciary infrastructures. Additionally, our expanded analysis confirms the financial benefits of digital innovation in reducing cost stickiness. A notable discovery is the negative correlation between digital transformation and cost stickiness within digitally innovative firms, underscoring the greater significance of digital innovation over mere digitization. Overall, this study significantly advances our understanding of how digital innovation influences cost management strategies.

Salmonella Typhimurium caused an unprecedentedly large foodborne outbreak in Finland in 2021.

Salmonella infections are significant causes of foodborne outbreaks in the European Union. This study investigates a sudden increase in gastroenteritis patients in the hospital district of Central Finland in June 2021. The primary aim was to study the outbreak's magnitude and source of the outbreak. Epidemiological, microbiological, environmental and traceback investigations were conducted. Over 700 persons fell ill during the outbreak caused by Salmonella Typhimurium associated with a daycare lunch. Similar S. Typhimurium was found in the patients and a vegetable mix containing iceberg lettuce, cucumber and peas served during lunch. The traceback investigation revealed that the batch information of vegetables from the wholesaler was not complete. The wholesaler had received quality complaints about the iceberg lettuce from the central kitchen. The manufacturer did not test the suspected batch for Salmonella since the production plant had given a certificate declaring it Salmonella negative. The most suspect ingredient was one batch of iceberg lettuce due to quality complaints. The lettuce had not been served in two daycare centres without cases. We recommend that in order to enable thorough microbiological investigation, institutional kitchens store the food samples separately as part of the internal quality control and that food items should always be tested when Salmonella contamination in an outbreak is suspected.

CEO power, internal control quality, and entrepreneurial innovation spirit in family enterprises

Using listed manufacturing enterprises in China from 2013 to 2020 as a sample, we find that CEO formal power, CEO integrated power, and internal control quality are positively and significantly related to the entrepreneurial innovation spirit of family businesses. CEO informal power, although not directly correlated, can enhance entrepreneurial innovation spirit by strengthening CEO formal power. In addition, internal control quality negatively regulates the relationship between CEO formal power and integrated power, and entrepreneurial innovation spirit. These findings highlight the incentive effects of CEO power and internal control on entrepreneurial innovation spirit in family enterprises, as well as the supervisory and inhibitory role of internal control over CEO power. This study contributes to the understanding of factors influencing entrepreneurial innovation spirit in family enterprises, focusing on CEO power and internal governance.

Does internal control improve enterprise environmental, social, and governance information disclosure? Evidence from China

AbstractEnvironmental, social, and governance (ESG) is a relatively new concept that emphasizes how to contribute to creating sustainable businesses. However, research on factors that influence ESG development is insufficient. This study explores how internal control influence enterprise ESG information disclosure, using 2009–2021 data from China's A‐share listed companies. The findings show a substantial positive correlation between internal control quality and corporate ESG information disclosure. Particularly, the internal control quality significantly affects corporate governance information disclosure. Moreover, the connection between internal control quality and enterprise ESG information disclosure is significantly and positively moderated by media attention. Specifically, negative media evaluations have significant impacts on enterprises. The main findings remain valid even after conducting multiple robustness tests, such as the lag test, propensity score matching, instrumental variable method, and alternative measurements for the key variables. This study widens the theoretical research frontier of internal and external supervision mechanisms.

Customer concentration and management earnings forecast

This paper examines the impact of customer concentration on the surplus forecasts of listed companies by using the data of China's A-share listed companies from 2012 to 2022. It is found that the higher the customer concentration, the lower the voluntariness of management's disclosure of surplus forecasts; when firms' customers are highly concentrated, management tends to disclose optimistic earnings forecasts; the economic policy uncertainty and the quality of firms' internal control moderated the relationship.

Impact of goal congruence on higher education institutions’ performance quality

PurposeIn India, national accreditation agencies stipulate that internal quality control in higher education institutions (HEIs) is to be institutionalized through internal quality assurance cells that are responsible for implementing and controlling quality systems. As the concept of goal congruence is central to a control process, this study aims to examine whether goal congruence is observed in such institutions. The impact of the absence of goal congruence on the quality of performance in higher education was also examined.Design/methodology/approachThis cross-sectional study measured the impact of goal congruence or the lack thereof on the performance quality of HEIs as defined in the evaluation criteria of the apex accreditation agency, the National Assessment and Accreditation Council. Two hypotheses were tested using t-tests and regression analysis. Focus group discussions were conducted to elicit participants’ suggestions.FindingsThe results showed a lack of goal congruence between HEIs’ quality goals and their faculty’s personal goals, which adversely impacts the quality of their performance, as indicated by an average disagreement of 81% on a ten-statement scale. Goal congruence as an independent variable explained 63% of the variability in HEIs’ performance quality, and the results were statistically significant, indicating that lack of goal congruence is an important contributor to poor performance among HEIs.Originality/valueAccreditation of HEIs is a global practice; hence, the findings of this study and the importance of goal congruence apply not only to India but also to HEIs globally.

Can multiple major shareholders reduce the probability of listed firms receiving inquiries from stock exchanges? Evidence from China

Taking the Chinese A-share listed firms (2015–2020) as the research object, this study examines the impact of the presence of multiple majority shareholders (MMS) on the probability of stock exchanges inquiries (PSEI) and its mechanism. We show that the MMS can increase probability of PSEI. The mediating test shows that MMS increases PSEI by reducing the quality of internal control. Besides, a favorable information and legal environment can reduce MMS's impact on PSEI, and independent directors fail to function as supervisors and consultants.