Social Trust and Internal Control Quality - Evidence from China

Abstract

This paper investigates the relationship between social trust and internal control quality. It is found that in general, social trust has strongly associated with internal control quality. When the variable NGO substitutes for social trust, the similar result is arisen. Furthermore, when the variable ICQ is more than third quartile in the ICQ index, social trust has positively relationship with the ICQ; on the contrary, when the variable ICQ is less than one quartile in the ICQ index, social trust has negatively relationship with the ICQ. This paper also testifies the trust residual that sites out the managerial ability factor from trust index is also positively related with the variable ICQ at the confidence level of 1%. In sum, trust is associated with internal control quality based on the evidence from China.