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Purpose – The purpose of this paper is to assess whether ownership concentration, leverage and demand for equity financing is associated with internal corporate governance quality. The paper focuses on dimensions of governance quality that are related to financial reporting quality.

Design/methodology/approach – The authors measure internal governance quality by an indicator variable that takes on higher values depending on whether a company has an audit committee, has a sufficient number of audit committee meetings during the year, has financial expertise on the audit committee, has an internal auditing function, a risk management function, a code of conduct and whistle blower provisions in the code of conduct. The sample consists of 91 Swedish listed companies of which 39 companies had to follow the Swedish Corporate Governance Code. The development of hypotheses is based on agency theory. Ordered logistic regressions are used to test the hypotheses.

Findings – The paper finds a strong negative association between leverage and the internal governance quality score for companies that do not have to follow the Corporate Governance Code. The paper also finds a positive association between the governance quality score and dispersed ownership among companies that have to follow the code.

Research limitations/implications – The negative association between leverage and governance quality is opposite to the typical agency theory prediction. A number of other studies have also documented negative or insignificant associations with leverage in related settings. The research suggests there is a demand to develop theories related to leverage and the implementation of governance characteristics beyond the typical agency theory based predictions.

Practical implications – The results raise the question whether lenders more actively directly or indirectly should influence the governance quality of borrowers.

Originality/value – Based on the conjecture that governance quality increases with the number of governance elements, the paper studies a governance score that is built up by several elements of good corporate governance. Furthermore, the authors study a setting dominated by voluntary choices of governance quality, which makes it possible to study supply effects.

I artikeln presenteras resultatet från en studie av den interna kontrollen i 97 noterade svenska bolag. Studien visar att 2/3 av bolagen ökat sina investeringar på intern kontroll under undersökningsperioden. I frågor om nyttan med intern kontroll höll respondenterna i störst utsträckning med om att sannolikheten för att den finansiella rapporteringen ska innehålla fel har blivit lägre, samt att satsningar på intern kontroll inneburit att revisorerna i större utsträckning kan förlita sig på den interna kontrollen. 68 procent av företagen instämde med påståendet att ytterligare åtgärder kommer att vidtas för att förbättra den interna kontrollen under kommande år.

We present results from a survey about the internal control in 97 swedish publicly traded companies. the results show that 2/3 of the companies have increased their investments on internal control during the period studied. In questions about the benefits with internal control, the highest fraction of the respondents agreed with the statement that internal control investments has reduced the likelihood that the financial statements will include errors, and that auditors to a greater extent can trust the internal control. 68 percent of the companies agreed with the statement that they will further improve the internal controls during coming years.