We examine how the internal control quality is related to two attributes of audit committees, namely political connection and academic qualifications, for state-owned enterprises (SOEs) and privately owned enterprises (POEs) in China. Our results show that internal control quality is positively associated with the presence of audit committee members connected to the Chinese Communist Party (CCP), and the percentage of academic directors. Interestingly, the effect of CCP connected audit committee members is more pronounced in SOEs, while that of academic directorship is significant only in POEs but not in SOEs. This study provides useful insights for regulators regarding policy implications for audit committees, and the unique role played by CCP connection on effective governance in China
Ji et al. (Sun,) studied this question.