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 11 © 2023 Global Journals Table 3: Ordinary Least Squares Regressions of Performance Determinants Predicted sign ROA ROE TobinsQ Intercept ? 3.116*** 0.451** 4.547 Long-termdebt + 0.000 0.000 0.000 LNAssets + -0.315*** -0.031 -0.269 IASize + -0.146 -0.139 -0.743 IAQualify + -0.526 -0.034 -1.964 IAExp + -0.543 -0.057 1.858 IAgrow + 0.005*** -0.001** -0.001 IAtrainquality + 0.020 0.041 -0.167 SOX + 0.149 -0.073 -2.112 Financial + 1.455*** -0.075 5.028* UK + -0.047 0.098 6.184** F-statistic 3.506** 1.805 1.108 Adj R-squared 0.241 0.092 0.014 Table Notes: UK is a dummy variable set to 1 if UK, 0 otherwise; Asset is total assets of firm as at 2004 (compustat #89); MB is the ratio of market to book (compustat #135); ROA is ratio of income before taxes over total assets, averaged for three years ended 2004 (compustat #21/#89); ROE is ratio of income before taxes over total shareholders equity, averaged for three years ended 2004 (compustat #21/#135);; 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. * Significant at 0.10 level ** Significant at 0.05 level ***Significant at 0.01 level f) Multivariate Tests We conduct both logistic and OLS regressions of the strength of relationship between internal control expenditures and various demand and supply characteristics of European firms. We first make a crude assumption is that there is likely to be some form of relationship between the European firm’s overall strategic decision about the extent to which their property rights over the international credibility of their compliance costs is ‘sacrificed’ to political economy considerations (i.e. whether the firm is based in the UK, complies with SOX or is a more regulated financial firm) and the relevant supply and demand characteristics. Table 4 reports the results of a logistical regression used to regresses the supply side drivers of compliance cost expenditures, which are attributed to take the form of various internal control compliance quality proxies, against various regulatory or cultural variables associated with UK versus non UK; interaction variables are also developed for political economy influencers, such as SOX versus non SOX compliant and financial versus non-financial. For the UK model, there is a significant association between the propensity to be based in the UK (and hence investor-oriented, which is analogous to that implied by proposition 2), and both the size and qualifications of the internal control department. There is also a positive relationship with leverage. By contrast, the results of the other logistic regressions concerning the relationship between the overall strategic decision concerning property rights and SOX compliance are more equivocal. For the SOX compliance regression, the propensity of European firms to be SOX compliant is related only to firm size, leverage and the quality of training undertaken by internal control staff. Hence there is only limited support for the predicted association for this regression. There is no association between being a financial firm and either supply or demand characteristic. Thus the hypothesized relationships require some further sensitivity checks.