Chief executive officer (CEO)’s rural origin and internal control quality

• Published in: Economic modelling Vol. 95; pp. 441 - 452
• Main Authors: Shen, Huayu, Xiong, Hao, Zheng, Shaofeng, Hou, Fei
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.02.2021
• Subjects: Information transparency; Internal control; Personal characteristics; Rural origin; Urban and rural areas; Information transparency; Personal characteristics; Internal control; Urban and rural areas; Rural origin
• ISSN: 0264-9993; 1873-6122
• DOI: 10.1016/j.econmod.2020.03.011

How does CEO’s rural origin impact on the quality of firm’s internal control under China’s urban-rural dual system? Using a hand-collected sample of Chinese listed firms between 2006 and 2018, our paper investigates the effect of CEO’s “rural” background on the quality of the firm’s internal control. The empirical results show that CEO’s rural origin could significantly improve the quality of firm’s internal control. Furthermore, we find that when the CEO is female, the positive effect of CEO’s rural origin on the internal control quality of the firm is not pronounced; however, when the CEO is older and has higher education background, the positive impact of CEO’s rural origin on the internal control quality of the firm is more pronounced. Finally, our findings support that the lower the transparency of corporate information, the more reflected the positive effect of CEO’s “rural” background on the internal control quality of the firm. •CEO’s rural origin could significantly improve the quality of firm’s internal control.•CEO’s rural origin could significantly improve the quality of firm’s internal control.•When the CEO is older and has higher education background, the positive impact of CEO’s rural origin on the internal control quality of the firm is more pronounced.