Despite the burgeoning interest in environmental, social and governance (ESG) ratings, current results regarding ESG rating-performance relationship are inconclusive. Since what affects this disagreement is ambiguous, we examine how internal control weaknesses (ICW) may affect the relationship between ESG rating and a firm's performance.In fact, employing a sample of French listed firms during the period between 2012 and 2018, we predicted and found that both ICW and ESG ratings have a positive and significant influence on a firm's performance. In addition, the results indicate that ICW negatively and significantly moderates the relationship between ESG ratings and corporate performance. Moreover, the robustness of the results is checked through the generalized method of moments regression. We also offer theoretical and practical implications to drive policymakers and businesses to assure sustainable development.We expect that our study can help managers to strengthen their internal resources, such as the internal control (IC) and ESG ratings to improve a firm's performance.

The purpose of this paper is to examine the effect of the board of directors, namely board size, board independence, and CEO duality, as well as audit quality on the disclosure of internal control information. The sample consists of 164 European companies listed in the STOXX Europe 600. Based on positive agency theory, the authors posit that board of directors and audit quality influence corporate internal control disclosure practice. The content analysis and the design of the evaluation criterion were used to calculate the disclosure index of internal control. Thus, multiple regression analysis is utilized to analyze the results of this paper. The average internal control information disclosure index was 0.285, indicating that most of the companies in our sample do not disclose enough information about the internal control. This low level of forward-looking information disclosure makes it very difficult for corporate stakeholders to determine the future performance of the company. Multivariate results indicate that internal control disclosure is positively and significantly associated with board independence, CEO duality, and audit quality. This study contributes to the literature on the various governance characteristics and disclosure by showing that the disclosure of internal control information in European countries is positively and significantly associated with board independence, separation of duties, and audit quality. Our study was based on a sample of European companies including countries regulating IC disclosure as well as unregulated settings. As noted by Bedard and Graham (2014), regulatory differences in countries can contribute insights on the costs and benefits of disclosure. Findings also have policy implications for investors, managers, and regulators.

This study examines the impact of internal control (IC) and corporate social responsibility (CSR) on conditional accounting conservatism (CAC). We employ legitimacy theory to understand whether managers adopt CSR reports and IC systems to seek legitimacy through symbolic actions or whether they do so to provide substantive actions to their stakeholders.We adopt a multivariate analysis for a sample of 98 French companies belonging to the SBF 120 index during the period between 2012 and 2021. All accounting and stock market information is extracted from the Thomson Reuter database (Datastream) and the Thomson Reuters ASSET4 ESG database. We found that both IC and CSR have a negative and significant impact on CAC; hence, managers may use CAC levels as a legitimizing tool for corporate activities. French companies are generally characterized by strong IC systems, suggesting a low demand for conditional conservatism. Socially responsible companies may have fewer agency issues and therefore will not practice accounting conservatism (AC) in a pronounced way. Distinct from the previous literature, our study examines the impact of IC as well as CSR on CAC, which provides useful insights regarding how stakeholder pressure, in terms of reporting on social responsibility and maintaining effective control systems, interacts with and impacts upon managers' decisions to adopt CAC in the French context. Given the position of France after Brexit and the new laws adopted regarding an emphasis on the social dimension in corporate reporting, protecting stakeholders' interests, and adopting conservatism, it is worth using such a context to gain a better understanding of AC, as this will enrich the literature.

This paper examines the effect of internal control (IC) quality, measured by IC weakness disclosures, on the quality of financial statements’ information, measured by real and accrual-based earnings management. The sample consists of 686 firm-year observations of French non-financial companies listed in the SBF 120 index during the period between 2012 and 2018. Using ordinary least squares (OLS) and generalized method of moments (GMM) regression, our empirical results indicate that IC weakness disclosures are positively and significantly related to real activities manipulation and negatively associated with discretionary accruals. This provides empirical evidence that a good system of IC reduces accrual-based earnings management activities and improves the reliability of financial statements; however, it cannot control real earnings management (REM). The research findings are of practical interest not only to financial analysts, auditors, and investors—guiding them to pay attention to REM activities in case of disclosures of IC weaknesses—but also to regulators, who may consider additional disclosure requirements when reporting material IC weaknesses and designing policies that could help in reducing REM practices.