Global Journal of Management and Business Research, A: Administration and Management, Volume 23 Issue 10

Sustainable Compliance Programs in Complex Organizations Global Journal of Management and Business Research ( A ) XXIII Issue X Version I Year 2023 10 © 2023 Global Journals Correlations Among Independent Variables the ratio of market to book (compustat #135); ROA is ratio of income before taxes over total assets, averaged for four years ended 2005 (compustat #21/#89); ROE is ratio of income before taxes over total shareholders equity, averaged for three years ended 2004 (compustat #21/#135); Audit is audit fees, averaged for the four years ended 2005; IA size is ratio of number of IA staff to total number of company staff (survey question 12/question 7); IAqual is ratio of number of IA staff with accounting qualifications over total size of IA (survey question 13i/12); IA exp is ratio of number of experienced IA staff to number of IA staff (survey question 13ii/12); IA growth is difference between number of IA staff in 2005 compared to 2002, divided by number of IA staff on average (survey question 15-question 12/ave); IA quality is self-assessed effectiveness on a likert scale of 1 to 6 (survey question 16); SOX is dummy variable set to 1 if NYSE cross listed and thus subject to SOX, 0 otherwise; financial is dummy variable set to 1 if financial firm, zero otherwise UK LTD Assets MB ROA ROE Audit IAsize IAqual IAexp IAGrow IATrain SOX Financial UK 1 -0.112 -0.100 0.295** -0.084 0.192 -0.086 -0.086 0.268* 0.011 0.223* 0.155 0.122 0.045 LTD -0.112 1 0.799*** -0.047 -0.043 -0.040 -0.020 -0.015 0.018 -0.009 -0.062 0.027 - 0.080 0.335** Asset -0.100 0.799** 1 -0.086 -0.070 -0.072 -0.036 -0.031 0 .001 0.030 -0.031 0.026 0.053 0.572** MB 0.295* -0.047 -0.086 1 -0.040 0.228** -0.033 -0.035 0.050 0.018 -0.068 0.005 - 0.074 0.169 ROA -0.084 -0.043 -0.070 -0.040 1 -0.018 -0.012 -0.006 -0.156 -0.172 0.201 -0.112 - 0.084 0.149 ROE 0.192 0.040 -0.072 0.228* -0.018 1 -0 .007 -0.036 -0.101 -0.162 -0.325** 0.104 - 0.088 -0.174 Audit -0.086 -0.020 -0.036 -0.033 -0.012 -0.007 1 -0.012 0.004 0.122 -0.032 0.093 - 0.080 -0.065 IAsize -0.086 -0.015 -0.031 -0.035 -0.006 -0.036 -0.012 1 -0.155 -0.039 0.059 0.097 - 0.080 0.056 IAqual 0.268 0.018 0 .001 0.050 -0.156 -0.101 0.004 -0.155 1 0.557** 0.264* 0.069 0.044 0.071 IAexp 0.011 -0.009 0.030 0.018 -0.172 -0.162 0.122 -0.039 0.557** 1 0.307** 0.093 0.082 0.032 IAgrow - 0.223* -0.062 -0.031 -0.068 0.201 - 0.325** -0.032 0.059 0.264* 0.307** 1 -0.012 - 0.014 0.027 IAtrain 0.155 0.027 0.026 0.005 - 0.112 0.104 0.093 0.097 0.069 0.093 -0.012 1 0.210 0.131 SOX 0.122 -0.080 0.053 -0.074 -0.084 -0.088 -0.080 -0.080 0.044 0.082 -0.014 0.210 1 0.015 Financial 0.045 0.335** 0.572** 0.169 0.149 -0.174 -0.065 -0.056 0.071 0.032 0.027 0.131 0.015 1 Table 2: Relation to Firm Performance : The propositions developed in section 3 also assume that there is an association between firm reported performance, and the extent of compliance costs incurred. Table 3 reports an OLS regression that establishes the inter-relationship between demand and supply characteristics of the European firms, where performance is determined either by reference to return on assets, return on equity or by reference to the Tobin’s Q measure. This establishes whether a prima-facie empirical justification can be made for relating firm performance with the extent of compliance cost expenditure (based on various qualitative characteristics). The evidence reported in table 3 suggests that there is an association between return on assets and the size of the European firms. There is also a positive association between return on assets and the growth of internal control department expenditures over time. Finally there is a positive association between return on assets and whether the firm is financial. Thus it is important to control for the impact on firm performance of industry characteristics. Results of the other performance regressions are less equivocal. For the Return on Equity regression however, there is no significant statistical association between ROE and these variables, except again for internal control department control growth rate. For the Tobin’s Q measure, there is only a marginal relationship between Tobin’s Q and whether the firm is financial and based in the UK. These tests imply that there is only a limited relationship between a firm’s reported performance and various demand and supply characteristics used to infer their relationships between compliance cost expenditures.