Internal control quality systems and environmental violations: how digitalization, media coverage and returnee directors make a difference

Ali, A, Yang, Q, Ali, A, Raza‐Ullah, T ORCID: https://orcid.org/0000-0002-8539-2992 and Ali, Z, 2025. Internal control quality systems and environmental violations: how digitalization, media coverage and returnee directors make a difference. International Journal of Finance and Economics. ISSN 1076-9307

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Abstract

Despite the dominant discourse on the significant role of internal control quality (ICQ) systems in corporate governance, their potential to mitigate corporate environmental violations has remained largely underexplored. Drawing on agency theory and stakeholder theory, we develop and test a novel model proposing that ICQ systems reduce environmental violations, with their impact being amplified by digitalization, media coverage and returnee directors. Using a longitudinal dataset of 773 Chinese-listed firms from 2008 to 2018, we find a significant negative relationship between ICQ systems and environmental violations. This relationship is more prominent in firms with high levels of digitalization, media coverage and returnee directors. These results remain robust across alternative measures and endogeneity checks, including propensity score matching, Heckman corrections, industry controls and a two-year lagged approach. This study contributes to the corporate governance and environmental management literature by reframing ICQ systems as a central mechanism for environmental stewardship and providing insights into how contextual factors, such as digitalization, media coverage and returnee directors interact with these systems to further enhance their effectiveness. The findings offer valuable implications for managers and policymakers aiming to improve corporate governance and environmental compliance.

Item Type:	Journal article
Publication Title:	International Journal of Finance and Economics
Creators:	Ali, A., Yang, Q., Ali, A., Raza‐Ullah, T. and Ali, Z.
Publisher:	Wiley
Date:	12 December 2025
ISSN:	1076-9307
Identifiers:	Number Type 10.1002/ijfe.70121 DOI 2576725 Other
Rights:	This is the peer reviewed version of the following article: Ali, A, Yang, Q, Ali, A, Raza‐Ullah, T and Ali, Z, 2025. Internal control quality systems and environmental violations: how digitalization, media coverage and returnee directors make a difference. International Journal of Finance and Economics, which has been published in final form at https://doi.org/10.1002/ijfe.70121. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
Divisions:	Schools > Nottingham Business School
Record created by:	Jonathan Gallacher
Date Added:	02 Mar 2026 10:24
Last Modified:	02 Mar 2026 10:37
URI:	https://irep.ntu.ac.uk/id/eprint/55350

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