Foreign ownership, subjective willing, and internal control level.

Area of Science:

• Corporate Finance
• Capital Markets
• Corporate Governance

Background:

• Foreign shareholders play a crucial role in capital market development.
• Understanding the impact of foreign ownership on corporate governance is vital.
• Internal control quality is a key determinant of firm performance and sustainability.

Purpose of the Study:

• To investigate the effect of foreign shareholding on internal control quality in A-share listed firms.
• To explore the mediating role of "internal control willingness" in this relationship.
• To examine how foreign ownership contributes to the sustainable development of investee firms.

Main Methods:

• Utilized text analysis and machine learning techniques.
• Constructed a novel "internal control willingness" variable.
• Analyzed A-share listed firm data from 2012 to 2021.

Main Results:

• Foreign shareholding significantly enhances internal control quality.
• The positive impact is more pronounced in firms with higher "internal control willingness".
• Foreign shareholders promote the sustainable development of investee firms.

Conclusions:

• Foreign ownership is a significant driver of improved internal control and corporate sustainability.
• The positive effects are amplified in environments with legal foreign shareholders, competitive industries, and robust legal frameworks.
• Findings offer insights for firms leveraging foreign investment and for policymakers in China's capital market and foreign investment regulation.