Internal Control and Sustainable Corporate Responsibility: Evidence from China

This study uses data from Chinese A-share listed firms between 2008 and 2022 and finds that higher internal control quality (ICQ) is significantly associated with better corporate social responsibility (CSR). The result is robust to alternative measures, instrumental variables, lagged ICQ, propensity-score matching, multi-period difference-in-differences, and uninterpolated data. Evidence supports four mechanisms: lower agency costs, enhanced reputation, stronger responsibility-oriented culture, and more efficient resource allocation. The relationship is stronger in non-high-tech, labor-intensive, and indirect-to-consumer industries, weakened by business complexity, and strengthened by analyst attention. These findings extend internal control beyond financial reporting and compliance to responsible and sustainable corporate conduct.