Internal Control Quality, Related Party Transactions and Accounting Information Comparability

In recent years, the financial fraud cases of Chinese listed companies happen frequently, which has been widely concerned by society. Most financial fraud incidents occur in ways that the disclosure of financial statements is not true, and accounting information is not comparable. As the key to the success or failure of corporate governance, internal control quality can restrain the occurrence of related party transactions, especially abnormal related party transactions, and effectively affect the authenticity of financial statements disclosure and the accounting information comparability. However, the existing researches have not yet combined the internal control quality, abnormal related party transactions, and accounting information comparability. Therefore, we explore the influence of internal control quality on the accounting information comparability and related party transactions. Through an empirical study of A-share listed companies in Shanghai and Shenzhen stock exchanges from 2015 to 2019, we find that the scale of related party transactions, especially the scale of abnormal related party transactions, hurts the accounting information comparability, while internal control quality has a positive influence on accounting information comparability. The better the internal control quality, the stronger the restraining effect the abnormal related party transactions is negatively related to the accounting information comparability. Compared with private enterprises, the internal control quality of state-owned enterprises has a stronger inhibiting effect on the abnormal related party transactions and accounting information comparability.