Corporate Social Responsibility and Internal Control Weakness: The Empirical Testing of Stakeholder and signaling Theories
responsibility tends to either culminate in the elimination of conflict of interests among stakeholders, thereby maximizing shareholders’ wealth or develop the procedures to manage management reputation in the marketplace at the expense of shareholders. The present study thus aims at investigating the association between the disclosure of corporate social responsibility and internal control weakness with respect to stakeholder and signaling theories in the Iranian listed firms. The research hypotheses are built upon a sample of 107 firms listed on the Tehran Stock Exchange during the years 2013-2017 and then tested using multivariate logistic regression model. The findings reveal that corporate social responsibility disclosure is significantly correlated with internal control weakness. This suggests that corporate social responsibility is concerned with eliminating the conflict of interests among stakeholders, thereby maximizing shareholders’ wealth and improving internal control efficacy.
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