Vai trò điều tiết của lãnh đạo đối với kiểm soát nội bộ nhằm nâng cao kết quả hoạt động kinh doanh của các doanh nghiệp tại Việt Nam.Vai trò điều tiết của lãnh đạo đối với kiểm soát nội bộ nhằm nâng cao kết quả hoạt động kinh doanh của các doanh nghiệp tại Việt Nam.Vai trò điều tiết của lãnh đạo đối với kiểm soát nội bộ nhằm nâng cao kết quả hoạt động kinh doanh của các doanh nghiệp tại Việt Nam.Vai trò điều tiết của lãnh đạo đối với kiểm soát nội bộ nhằm nâng cao kết quả hoạt động kinh doanh của các doanh nghiệp tại Việt Nam.Vai trò điều tiết của lãnh đạo đối với kiểm soát nội bộ nhằm nâng cao kết quả hoạt động kinh doanh của các doanh nghiệp tại Việt Nam.Vai trò điều tiết của lãnh đạo đối với kiểm soát nội bộ nhằm nâng cao kết quả hoạt động kinh doanh của các doanh nghiệp tại Việt Nam.Vai trò điều tiết của lãnh đạo đối với kiểm soát nội bộ nhằm nâng cao kết quả hoạt động kinh doanh của các doanh nghiệp tại Việt Nam.Vai trò điều tiết của lãnh đạo đối với kiểm soát nội bộ nhằm nâng cao kết quả hoạt động kinh doanh của các doanh nghiệp tại Việt Nam.Vai trò điều tiết của lãnh đạo đối với kiểm soát nội bộ nhằm nâng cao kết quả hoạt động kinh doanh của các doanh nghiệp tại Việt Nam.Vai trò điều tiết của lãnh đạo đối với kiểm soát nội bộ nhằm nâng cao kết quả hoạt động kinh doanh của các doanh nghiệp tại Việt Nam.Vai trò điều tiết của lãnh đạo đối với kiểm soát nội bộ nhằm nâng cao kết quả hoạt động kinh doanh của các doanh nghiệp tại Việt Nam.
MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY TU THANH HOAI THE MODERATING ROLE OF LEADERSHIP IN INTERNAL CONTROL TOWARD ENHANCING THE PERFORMANCE OF VIETNAMESE FIRMS PH.D THESIS SUMMARY Major: Accounting Code: 9340301 Ho Chi Minh City – 2022 The thesis is prepared at: University of Economics Ho Chi Minh City (UEH) Thesis supervisor: Associate Professor, Dr Nguyen Phong Nguyen Dr Tran Anh Hoa Reviewer 1: Reviewer 2: Reviewer 3: The thesis will be presented to the Thesis Grading Committee at the University of Economics Ho Chi Minh City At…….hours…… day…….month………year……… This thesis can be found at the library of the University of Economics Ho Chi Minh City LIST OF PUBLICATIONS Tu, T H, & Nguyen, N P (2021) How does cross-functional cooperation influence organizational performance? The mediating role of management accounting systems Cogent Business & Management, 8(1), 1907011 (NXB Taylor and Francis - ESCI, Scopus Q2) Nguyen, N T T., Nguyen, N P., & Tu, T H (2021) Ethical leadership, corporate social responsibility, firm reputation, and firm performance: A serial mediation model Heliyon, 7(4), e06809 (NXB Elsevier - SSCI, Scopus Q1) Tu, T H., Bui, Q H., & Nguyen, P N (2022), The impact of internal control systems on the intensity of innovation and organizational performance of public sector organizations in Vietnam: The moderating role of transformational leadership Heliyon, 8(2), e08954 (NXB Elsevier - SSCI, Scopus Q1) Nguyen, N P., & Thanh Hoai, T (2022) The impacts of digital transformation on databased ethical decision-making and environmental performance in Vietnamese manufacturing firms: The moderating role of organizational mindfulness Cogent Business & Management, 9(1), 2101315 (NXB Taylor and Francis - ESCI, Scopus Q2) Tu, T H., & Nguyen, N P (2022) Internal control systems and performance of emerging market firms: The moderating roles of leadership consistency and quality SAGE Open, 12(3), 21582440221123509 (NXB Sage - SSCI, Scopus Q1) Hung, B Q., Hoai, T T., Hoa T.A., & Nguyen, N P (2022) Performance implications of the interaction between the accountants’ participation in strategic decision-making and accounting capacity Journal of Asian Business and Economic Studies (NXB Emerald ESCI, Scopus) INTRODUCTION The necessity of the research topic Nowadays, internal control activities and internal control effectiveness in enterprises are receiving considerable attention from managers and stakeholders (Agbejule and Jokipii, 2009; Chalmers et al., 2019) This is because internal control effectiveness can help enterprises reduce the cost of capital (Khlif et al., 2019), promote competitive advantages (Cheng et al., 2018), and increase firm performance (Lopez et al., 2009; Tetteh et al., 2020) and value enhancement (Gao and Jia, 2016) Furthermore, some studies show that internal control is a necessary mechanism to monitor the performance of enterprises (Goh and Li, 2011), promote cooperation between functional departments (Hunziker, 2017), and improve the efficiency of risk management and corporate governance (Aziz, 2013) Besides, internal control effectiveness has been shown quite clearly in the daily activities of enterprises (Le et al., 2020) Typical examples are the practical benefits that internal control effectiveness brings to management activities (Zhang et al., 2020), as well as the constant increase in the number of studies on internal control in recent years Therefore, strengthening the effectiveness of internal control is essential (Sarens and Christopher, 2010) – especially in emerging countries This also applies to Vietnam, as effective internal control helps businesses in Vietnam improve operational efficiency and create a sustainable competitive advantage (Hoai and Nguyen, 2019) Whether the internal control in each enterprise can fully promote its functions and values depends on many factors One of the factors affecting internal control and having great significance for the enterprise’s survival is the leadership team Leaders can fulfill management roles well partly due to intrinsic factors (Bernard, 1926) or factors formed in the management process, such as consistency, dignity, and responsibility (DuBrin, 2015; Saal and Knight, 1995) Among these factors, leadership consistency is considered prominent and has received much attention from previous studies (e.g., De Cremer, 2003; Rosenberg et al., 1955; Sorek et al associates, 2018) Leadership consistency is generalised, the tendency to maintain consistency in a leader's words and actions in various contexts (Leventhal, 1980) Consistency in words and actions will help leaders increase trust in employees (Wang and Hsieh, 2013) and create fairness in business processes (De Cremer, 2003) In addition, the consistency of leadership is considered a management art to satisfy customers (Pulido et al., 2014), helping leaders improve management efficiency, implement strategic goals, and improve business performance (Lakshman, 2008) In contrast, inconsistent leadership will lead to less success at work, even becoming a cause of business failure (Aboyassin and Abood, 2013; Bodolica and Spraggon, 2020) For example, inconsistent leadership causes employees to easily fall into a state of stress and change negatively to relieve psychological pressure, leading to reduced work productivity (Gawronski and Strack, 2012) These consequences cost employees a lot of resources to deal with, and the effectiveness of the internal control activities in which they participate is also reduced Therefore, the consistency of leadership in internal control is very critical because the consistency of leadership will help businesses achieve positive effects through employee satisfaction (Hoai and Nguyen, 2020) Leadership is often defined and evaluated through various characteristics, behaviors and qualities (Horner, 1997) Aspects of leadership qualities such as qualities ability to motivate, inspire, and influence (Zhou et al., 2008) will help enterprises to form a healthy working environment, leading to high employee satisfaction and commitment at work (Zhou et al., 2020) Suppose the leader is incompetent and has limited vision and management thinking In that case, businesses will face many difficulties in implementing strategic goals as well as building and developing prestige in the competitive market (Love et al., 2017) Therefore, in internal control activities, besides the consistency of leadership, leadership quality is also one of the key factors that enterprises must consider carefully Leadership qualities are demonstrated through the dominant attributes of the leader's personality, motivation, values, and skills (Stogdill, 1948, 1974) From the perspective of internal control, good leadership quality will help businesses achieve their internal control goals more easily In particular, internal control policies are proposed to ensure that enterprises can achieve the best results in protecting assets and improving operational efficiency (COSO, 2013) Therefore, quality leadership will tend to be assertive and consistent in internal control activities to maximize benefits for the business in different aspects (financial, operational, customer, competitive) picture, value, etc.) The author believes that leadership quality is a decisive factor for internal control activities in particular and the sustainable development of enterprises in general Previous studies on the state of internal control in Vietnam show that most enterprises are still young, and the exploitation of the benefits of internal control has only been noticed recently (Le et al 2020) The vast majority of Vietnamese enterprises not have well-organized internal control in all five components: control environment, risk assessment, control activities, information and communication, and monitoring (Nguyen et al Bui, 2018) Two of the five basic components of internal control, including control and supervision, are still loose (Xuan-Quang and Zhong-Xin, 2013) Thereby, it can be seen that enterprises in Vietnam need to operate internal control more effectively (Hoai and Nguyen, 2019) As mentioned above, the status and importance of internal control in enterprises in Vietnam show the need for research to understand and examine the factors that play a role in promoting internal control effectiveness in Vietnamese firms The literature review shows that research on internal control in Vietnam an emerging market in Asia, is still scarce (Le et al., 2020; Puni and Anlesinya, 2020) However, studies on the factors affecting internal control effectiveness in Asian countries with emerging markets such as Vietnam are quite abundant Specifically, Goh (2009) asserts that the audit committee and the board of directors significantly influence the effectiveness of the internal control of listed companies in Singapore because they assume the role of overseeing the dress limitations of the KSNB In Malaysia, internal audit practices and board characteristics significantly impact the internal control effectiveness of listed firms in the country (Fadzil et al., 2005) Many studies in China also show many factors affecting the effectiveness of internal control, including capital ownership structure and board composition (Zhang et al., 2020), corporate integrity (Shu et al., 2018), enterprise information technology capabilities (Chen et al., 2014), and internal control staff capacity (Liu et al., 2017) According to Liu et al (2012), the legal and institutional environment significantly influences the internal control effectiveness of listed companies in China Internal control will be conditioned to play its role and become effective when implemented in a clean legal and institutional environment (Liu et al., 2012) According to the author's knowledge, research on the mediating role of internal control effectiveness on the impact of internal control structure on firm performance and studies on the variables that moderate the effect of internal control structure on internal control effectiveness is still scarce in the world and Vietnam The study of Hoai and Nguyen (2019) has demonstrated the moderating role of corporate social responsibility (CSR) on the relationship between internal control structure and internal control effectiveness in increasing firm performance in Vietnam On the other hand, studies examining the moderating effects of leadership quality on the moderating role of leadership consistency in the relationship between internal control structure and internal control effectiveness to improve firm performance are still lacking Specifically, the internal control structure will influence the firm performance through internal control effectiveness, the consistency of leadership can play a role in moderating the impact of the internal control structure on internal control effectiveness, and leadership quality can moderate this moderating role However, these relationships remain unexplored in the theoretical background of leadership and internal control This is also a research gap that needs to be filled Bridging this research gap will help the thesis contribute to the theoretical background of leadership and internal control Besides, filling the research gap will also suggest firms allocate reasonable resources for human resource management and internal control to optimize operations and improve firm performance The thesis has employed the resource-based view (RBV) (Barney, 1991), cognitive consistency theory (Gawronski and Strack, 2012) and expectancy theory (Vroom et al., 2005) to build models and hypotheses The resource-based view is applied to explain the influence of internal control effectiveness on firm performance Cognitive consistency theory is used to justify the moderating effect of leadership consistency on the relationship between internal control structure and internal control effectiveness Additionally, the expectancy theory is applied to explain the moderating impact of leadership quality on the above moderating role Using theoretical pluralism in accounting research will open up a more comprehensive and multidimensional view of internal control in enterprises in Vietnam Using theoretical pluralism also minimizes the disadvantages of applying only one theory when developing a research model (Hoque et al., 2013) The above arguments have clarified the need to conduct a study to explore and examine the mediating role of internal control effectiveness, moderating role of leadership consistency, and moderated moderation role of leadership in Vietnamese firms Furthermore, exploring the moderating impact of leadership quality on the synergy between leadership consistency and internal control structure in the same research model will explain internal control effectiveness as well as its impact on firm performance, thereby contributing to increased performance for businesses in Vietnam Therefore, the author conducts the topic "The moderating role of leadership in internal control toward enhancing the performance of Vietnamese firms" Research objectives and research questions 2.1 Research objectives a Overall objectives The thesis is deployed to explore and test the moderation-mediation model showing the interaction between the leadership factors and the internal control structure, as well as the role of this interaction in improving internal control effectiveness, thereby improving firm performance for enterprises in Vietnam b Specific objectives: RO 1: Explore the relationship between leadership, internal control, and firm performance of enterprises in Vietnam RO 2: Test the mediating role of internal control effectiveness in the relationship between internal control structure and firm performance RO 3: Test the moderating role of leadership consistency on the impact of the internal control structure on the internal control effectiveness RO 4: Test the moderating effect of leadership quality on the moderating role of leadership consistency on the relationship between internal control structure and internal control effectiveness 2.2 Research questions RQ 1: In the practice of enterprises in Vietnam, is there a relationship between leadership, internal control and firm performance? RQ 2: Does the internal control structure affect firm performance through its effectiveness? RQ 3: Does leadership consistency moderate the impact of internal control structure on the internal control effectiveness? RQ 4: Does leadership quality moderate the moderating role of leadership consistency on the internal control structure and internal control effectiveness? Subject and research scope 3.1 Research subject The research subject of the thesis is the relationship between leadership, internal control and firm performance of enterprises in Vietnam Besides, the research subject of the thesis is also the mediating role of internal control effectiveness, the moderating role of leadership consistency in the relationship between internal control structure and internal control effectiveness, as well as the moderating effect of leadership quality on this moderating role 3.2 Research scope + Research space scope: The thesis is carried out with all types of enterprises in Vietnam, including private enterprises; joint-venture and association enterprises with foreign countries; foreign enterprises; stateowned enterprises of large, medium and small sizes These enterprises operate in various industries and fields (manufacturing, trade, services) in Vietnam and operate internal control systems (the survey established screening questions to ensure the exclusion of all firms that did not meet the requirements of the study) + Research time: The thesis is carried out from 2020 to 2022 Research method The thesis uses an embedded mixed method, with the qualitative method integrated into the quantitative method First, the author uses qualitative methods to explore the relationship between leadership, internal control and firm performance Qualitative research results through in-depth interviews with managers and analysis of opinions using NVivo software (version 12 Pro) have confirmed the existence of a positive relationship between leadership, internal control and firm performance in practice Furthermore, the qualitative research results have also confirmed the appropriate research models and hypotheses to be applied in Vietnamese conditions Next, the quantitative method is used to test the model and the proposed hypotheses using the partial least square structural equation modeling (PLS-SEM) with SmartPLS3 version 3.3.3 The research method of the thesis is presented in detail in Chapter Research contributions 5.1 Theoretical contribution This thesis contributes to the theoretical background of behavioral science on the combination of leadership and internal control Specifically, it explores and examines the moderating role of leadership consistency on the relationship between internal control structure and internal control effectiveness, as well as the moderating impact of leadership quality on this moderating role in Vietnamese firms, something that previous studies have not been able to Moreover, the testing of the moderated - mediation model has provided evidence on how to transform the synergy between leadership and internal control factors into outstanding firm performance for enterprises in Vietnam - an emerging market This thesis also contributes to the theoretical background of internal control when for the first time applying the cognitive consistency theory to a specific study in the field of accounting to explain the moderating role of leadership consistency on the impact of internal control structure on internal control effectiveness According to this theory, leaders are consistent and non-conflict, and then internal control activities under their direction will be implemented in a clear and unified manner Furthermore, when the internal control structure is fully organized and the leaders are consistent, employees will easily empathize with the needs of internal control, thereby enhancing cooperation to help achieve better results 5.2 Practical contribution Besides the academic aspect, the thesis also contributes to the business practice of enterprises in Vietnam By clarifying the interaction between the factors belonging to leadership and internal control, the thesis shows that enterprises need to orient and properly invest in human resources and the internal control system On this basis, enterprises can offer solutions to improve leadership consistency and quality to enhance internal control effectiveness further and improve firm performance In addition, the thesis also has implications for businesses regarding the assessment of leadership and management training, such as recruitment, training, development, and improvement of leadership quality to create conformity with the internal control system as well as the development strategy of the enterprise Thesis structure Abstract Introduction: the necessity of the research topic, research objectives and research questions, subject and research scope, research method, and research contributions + Chapter 1: Literature review + Chapter 2: Theoretical background and overall model + Chapter 3: Research method + Chapter 4: Research results and discussion + Chapter 5: Conclusion and implications Overall conclusion CHAPTER 1: LITERATURE REVIEW The objective of the thesis is to explore and examine the impact of the internal control structure on firm performance through the mediating role of internal control effectiveness The thesis also aims to explore and examine the moderating role of leadership consistency on the relationship between internal control structure and internal control effectiveness and the moderating impact of leadership quality in the above moderating roles Therefore, in Chapter 1, the author has synthesized related studies into three groups First, the author presents studies on the antecedents of internal control effectiveness Next, the author presents studies on the consequences of internal control effectiveness Finally, the author presents an overview of studies that combine leadership and internal control Through the literature review, the author identifies the research gaps, which is also the basis for the author to carry out the thesis Before conducting the literature review, the author conducted an automatic synthesis of studies related to internal control effectiveness (automated synthesis using Connected Papers) and obtained the results as shown in Figure 1.1 According to Figure 1.1, the studies on the factors affecting internal control effectiveness and the factors affecting internal control effectiveness are encapsulated in 41 studies, including qualitative, quantitative and mixed However, when the author looked at each specific study, 33 studies were excluded because these studies were not directly related to the author's research topic Additionally, the author has tried to search in many different ways to synthesize and present an overview of research related to the topic Figure 1.1 Antecedents of the internal control effectiveness Source: compiled by the author via Connected Papers 1.1 Literature review on the antecedents of internal control effectiveness Länsiluoto et al (2016) argue that the difference in internal and external characteristics of the enterprise has led to the difference in the effectiveness of internal control This is also the source of many studies on internal control effectiveness factors (Länsiluoto et al., 2016) Below, the author presents a summary of studies on internal and external factors affecting internal control effectiveness 1.1.1 Internal factors Group of factors related to organizational structure and enterprise capability Group of factors related to corporate culture 1.1.2 External factors Through the literature review on the factors affecting internal control effectiveness, the author found that these factors are very diverse and can be divided into two groups The first group is internal factors: internal control structure, size, capital ownership structure, corporate governance, board of directors, audit committee, CEO, capacity of internal control staff, enterprise's information technology capacity, achieved goals, flexibility in business activities, corporate culture (traditions, values, standards, frameworks) behavioral patterns, “invisible” aspects) and integrity of the business The second group is external factors: stakeholders, market competitiveness, and legal and institutional environment (legal regulations, ethnic culture) These 10 Besides, the thesis also explores and examines the moderating role of leadership consistency in the relationship between internal control structure and internal control effectiveness and the moderating impact of leadership quality on the moderating role of leadership consistency in Vietnamese firms 1.5 Research contributions The thesis has three contributions to the theoretical background combining leadership and internal control as well as to business practice Firstly, the thesis has joined the research trend on the critical role of internal control as well as the need to focus on internal control for enterprises to achieve better business performance (Chang et al associates, 2020) Specifically, the thesis has clarified how the internal control structure positively affects firm performance through the mediating role of internal control effectiveness That is, when the internal control structure is organized with all the components, the enterprise can achieve positive firm performance by enhancing internal control effectiveness Secondly, the thesis has made new findings when successfully demonstrating the moderating role of leadership consistency on the impact of the internal control structure on the internal control effectiveness and the moderating effect of leadership quality on the moderating role of leadership consistency in Vietnamese firms Finally, the thesis also shows a new contribution to the theoretical background of internal control when, for the first time applying the cognitive consistency theory to a specific study in the accounting field to explain the relationship between leadership and internal control This is because the cognitive consistency theory has traditionally been used in studies of social cognition, and behavioral psychology or to explain the coordination of relationships in an organisation (Gawronski and Strack, 2012) Chapter 1’s Conclusion 11 CHAPTER 2: THEORETICAL BACKGROUND AND MODEL DEVELOPMENT 2.1 Research concepts 2.1.1 Leadership related content 2.1.1.1 Overview of leadership Researchers in the field of leadership have defined leadership as the supreme executive and have great significance for business operations (Dasborough and Ashkanasy, 2002); has significant influence over subordinates as well as the individuals involved (Bass, 1985); who knows how to create favorable conditions for each employee and the whole team to accomplish a common goal (Yukl, 2012) Leaders influence subordinates and concerned individuals to realize their vision of what is achievable (Bass, 1985) through a shared sense of purpose or mission (Bass et al Avolio, 1997) Thus, in most situations, the leader must always put responsibility first, and they must be the propagator of the collective consciousness for the common goal of the enterprise If this responsibility is well performed, the leader can gather the support of employees in fulfilling his own mission as well as the mission of the enterprise Bass et al (1987) imply that a leader is someone who has the qualities to meet the requirements of the leadership role and has a profound influence on subordinates through consistency in his speech and actions The consistency of the top leader will set an example for other leaders to follow when communicating with subordinates (Bass et al., 1987) This leader's characteristics will create beauty in behavior and enrich the corporate culture 2.1.1.2 A framework for understanding leadership Within the theoretical background, there exist many studies on leadership frameworks (e.g., Barrow, 1977; Meyer and Meijers, 2017; Watkins, 2015) Each leadership framework has its merits and is relevant to different contexts (DuBrin, 2015) As the framework was developed for understanding leadership, Robbins (1997, 2002) concluded that leadership effectiveness depends on a group of factors that complement each other, namely: (1) leader characteristics and traits; (2) leader behavior and style; (3) group members characteristics; (4) internal and external environment According to Robbins (1997, 2002), the leader characteristics and traits include their distinctive traits: qualities, confidence, problem-solving abilities, a sense of purpose and the organization's future Next, the leader's behaviour and style are structured into information through their activities, such as exemplary, consistency, and respect for truth Besides, the special point of the group member (smart, good dynamism) will help the leader to complete the work excellently Finally, the internal and external environment will directly affect the ability to leadership effectiveness In the theoretical background, consistency is considered the “key” to success, and when the leader is not consistent in words and actions, the followers also not support them (Sorek et al., 2018) However, the leaders' quality determines the best results in management activities (DuBrin, 2015; Sorek et al., 2018) 12 Figure 2.1 Leadership framework of Robbins (1997, 2002) 2.1.1.3 Leadership consistency Consistency is generalized as a unity from beginning to end, which does not imply contradiction or contradiction Leadership consistency is the tendency to maintain harmony in a leader's words and actions in various contexts and times, both in the past and future (Leventhal, 1980) Leadership consistency means that the leader keeps the will to be consistent with what has been communicated, maintaining the consistency between words and actions to set an example for employees and ensure that the company accomplishes goals Leaders who are highly consistent in their words and actions build the trust and confidence of their associates (Zhu et al., 2004) In many cases, leadership consistency tends to produce better results than inconsistency, so the managerial effectiveness of consistent leaders is higher than that of inconsistent leaders (Li et al Wang, 2015) 2.1.1.4 Leadership quality Leadership qualities are characterized by prominent and prominent attributes of the leader's personality, motivation, values, and skills (Stogdill, 1948, 1974) That is, leaders with good qualities and high values will positively influence subordinates, giving them confidence in the leader's vision and the bright future of the business Besides, the move emphasizing the importance of collective consciousness also shows the determination of leaders to achieve common goals Leadership skills are demonstrated through the ability to direct, and lead, the will to face or take risks and dare to innovate and propagate innovation to bring advantages to business activities Previous studies have confirmed that leadership qualities are the basis for directing employees to a higher ethical foundation and improving firm performance (e.g., Plinio, 2009; Trevino et al., 2000) 2.1.2 Internal control-related content 2.1.2.1 Overview of the history and development of internal control In the early years of the twentieth century, when the link between audit and fraud began to receive the primary attention of the professional community (Sikka et al., 1998), Robert Montgomery was a pioneer in this field of attention to internal control Montgomery (1905) specifies the requirements that the independent auditor must test for a client's internal control because the results of the assessment of potential risks in the client's internal control are the basis for the audit for evaluating a client's internal control system to determine the nature and extent of further audit procedures Since then, Montgomery's recommendations have become the premise for the formation of concepts of internal control In 1929, based on the Federal Reserve System (FED) announcement, formal internal control became widely known and became a useful tool for the auditor during the sampling period audit activities In 1936, AICPA defined internal controls as measures and practices accepted and implemented within an enterprise to protect money and assets and check accounting records' accuracy In 1949, AICPA issued: the first definition of internal control, components of internal control, and internal audit standards related to various aspects of internal control AICPA has also emphasized the importance of internal control for corporate governance and independent auditors 1958 to 1962 was a period of many changes in the scope of internal control In 1958, the definition of internal control was narrowed down and divided into two components: accounting control and administrative control In 1972, CAP quickly issued the document “Understanding and evaluating internal control.” In 1979, the United States Securities and Exchange Commission (SEC) issued a regulation requiring listed companies in the United States to report on internal controls in their accounting activities 13 In 1985, the National Commission on Fraudulent Financial Reporting (also known as the Treadway Commission) formally established COSO (Committee on Funding Organizations of the Treadway Commission) In 1992, COSO issued its first report on internal control Compared to the previous period, the 1992 COSO report is the first document in the world that has been researched and identified in an almost complete and systematic way about internal control (Lawson et al., 2017) During 1995 - 1998, Internal Control shifted towards focusing on independent audits, information technology (control associated with the computer environment - COBIT standard) and specialized in each industry operations (Basel, bank supervisory reports, ) In 2001, Internal Control developed towards focusing on internal audit and risk management In 2004, COSO officially issued the "Corporate Risk Management Framework" (COSO Enterprise Risk management - COSO ERM) In 2008, COSO issued “Guidelines for monitoring the internal control system” In the following years, the rapid development of the economy made COSO in 1992 not enough to meet the internal control needs of enterprises Therefore, in 2013, COSO issued a new version to replace COSO in 1992 Compared to the 1992 version, COSO (2013) is the full successor version and adds further instructions for units in the design and develop internal control systems (Lawson et al., 2017) 2.1.2.2 Internal control concepts Internal control is one of the management tools used to protect the money and other assets of the enterprise (Gupta et al., 2013; Hay, 1993) Given the state of the economy at that time, the concept of the FED generally meets the basic requirements of management in protecting businesses against the risks of loss and damage to assets power At this stage, internal control has attracted much attention from academia and businesses when the practical benefits of internal control are shown by promoting the effectiveness of business activities (Hay, 1993) COSO (2013) presents internal control as a process influenced by an entity's management, management and employees, designed to provide reasonable assurance about achieving operational, financial reporting and compliance objectives According to COSO (2013), internal control is not only the regulations, policies or procedures set by the internal control department based on the established objectives of the enterprise but also rigid progress throughout the business process Therefore, this process requires coordination and cohesion from all levels of leadership to all enterprise employees As expected, this coordination and cohesion will bring better efficiency in operations; clarity, transparency, completeness and accuracy of the financial statements; the strict observance of the internal regulations of the enterprise and the provisions of the law 2.1.2.3 Internal control objective According to COSO (2013), internal control is established and operated towards three objectives: operations, financial reporting and compliance There are three types of objectives to which internal control is directed Operational objectives: Internal control helps the unit's operations to be efficient and effective, such as protecting the assets of the entity, effectively using resources, securing information, improving its reputation and expanding its markets effectively, and implementing business strategies Reporting objectives: Internal controls should help improve the truthfulness and reliability of reports provided to target audiences inside and outside the business Reports include both financial statements and other reports Compliance objectives: Internal control directs employees in the enterprise to raise awareness of compliance with laws as well as internal regulations in the unit 2.1.2.4 Internal control structure The internal control structure consists of five components: control environment, risk assessment, control activities, information and communication, and monitoring (COSO, 2013) Each enterprise will give direction 14 to design and operate internal control in its own way because the conditions and resources of enterprises are not the same However, in any type of enterprise, the internal control structure usually consists of five basic components, as mentioned by COSO (2013) These parts are inseparable and closely related to each other, perform the same tasks and affect the objectives of Internal Control Especially: Control environment: is considered the basic foundation of the internal control system with a set of procedures, standards and structures for implementing internal control • Risk assessment: every organisation is at risk of facing many potential risks from the business environment as well as within the enterprise • Control activities: are necessary actions taken to reduce risks in achieving the entity's objectives • Information and communication: information and communication play a very important role in internal control activities • Monitoring: is the process by which the unit manager monitors and evaluates the quality of the internal control system over time 2.1.2.5 Internal control effectiveness The extent of operation and effectiveness of internal control is understood as internal control effectiveness (Länsiluoto et al., 2016) Besides, internal control is effective when it achieves the objectives set by the enterprise, including effective operation, fair and honest financial statements, and legal compliance (Agbejule and Jokipii, 2009) 2.1.3 Firm performance In the thesis, firm performance is considered from a broader perspective: the results that enterprises achieve from business activities on both financial and non-financial aspects (for example, Morgan and Piercy, 1998) ; Fornell, 1992) The financial aspect is expressed through monetary expressions associated with financial and short-term indicators such as: revenue, return on sales (ROS), profit, return on assets (ROA), return on equity (ROE), return on invested (ROI), The non-financial aspect is expressed through factors that cannot be converted into cash and are portable Long-term factors, for example, customer retention, increase in new customers, market share, Business performance measured on both aspects as mentioned above will help us to evaluate overall the activities of the business 2.2 Underpinning theory 2.2.1 Resources–based view In the years from 1980 to 1990, the concept of resources began to take shape and developed into one of the important theoretical frameworks in the study of management strategy (Barney et al., 2001) The official view of the underlying source is provided by Wernerfelt (1984) through synthesising and analysing the relationship between profits and internal sources of enterprises Wernerfelt (1984) has only prioritised the first point of resources that can help firms enhance their ability to gain a competitive advantage in the market Next, Barney (1991) inherits and develops this view by establishing that different attributes of the resources owned by firms will lead to differences in firm performance 2.2.2 Cognitive consistency theory Cognitive consistency began to be of interest to psychologists in the 20th of the twentieth century and was strongly developed in the 1940s - 1960s (Simon et al., 2004) Cognitive consistency theory mainly originated with Heider (1958) and was subsequently further developed by many researchers (e.g., Abelson, 1983; Abelson et al., 1968; Feldman, 2013; Gawronski et al Strack, 2012; Kruglanski et al., 2018; Read and Simon, 2012) This is one of the expressions commonly used to explain coordinating relationships among an 15 organisation's members During a pivotal period in the development of social psychology, the cognitive consistency theory was put forward to make significant progress in human understanding of core content and processes based on human cognitive consistency (Read and Simon, 2012) 2.2.3 Expectancy theory In 1964, the expectancy theory was first proposed by Vroom; in later stages, this theory was inherited and developed by many other researchers (e.g., Hackman and Porter, 1968; Lawler, 1968) ; Vroom et al., 2005) According to Vroom et al (2005), people's motivations and actions associated with work are not necessarily governed by current developments but are also determined by their own perception of future hope More precisely, individuals will act in certain ways based on their expectations of a certain outcome or the attractiveness of that outcome to them 2.3 Development of hypotheses 2.3.1 The mediating role of internal control effectiveness H1: The internal control structure positively affects the internal control effectiveness H2: Internal control effectiveness positively affects firm performance H3: Internal control effectiveness mediates the impact of internal control structure on firm performance 2.3.2 The moderating role of leadership consistency H4: Leadership consistency positively moderates the relationship between the internal control structure and effectiveness 2.3.3 The moderated moderation of leadership quality H5: Leadership quality has a positive moderating effect on the moderating role of leadership consistency in determining the impact of the internal control structure on the internal control effectiveness 2.4 Model Figure 2.2 Proposed model and hypotheses Chapter 2’s Conclusion 16 CHƯƠNG 3: RESEARCH METHOD 3.1 Discuss the research method used The thesis aims to understand the relationship between leadership, internal control and firm performance in corporate practice in Vietnam In addition, the thesis also aims to build and test a moderating-mediation model that demonstrates the impact of the internal control structure on firm performance through the mediating role of internal control effectiveness The model also shows the moderating effect of leadership quality on the moderating role of leadership consistency in the relationship between internal control structure and internal control effectiveness In Vietnam, the above relationships are not clearly understood, so the author uses the mixed embedding method to solve this limited problem In the thesis, qualitative research is used to understand the relationship between leadership, internal control and firm performance of Vietnamese firms In the qualitative phase, through the grounded theory, the author conducts in-depth interviews and analyses managers' opinions to find the above relationships and assess the model's relevance in real conditions in Vietnam After being tested for suitability with Vietnamese conditions at the qualitative stage, the models and hypotheses were tested in the qualitative stage In the quantitative phase, the results of the analysis of survey data are to prove the fit of the model with the collected data as well as to show the acceptance of the research for the proposed hypotheses 3.2 Overall research process Stage 1: Literature review and proposing a research model Stage 2: Conduct qualitative research Stage 3: Conduct quantitative research Stage 4: Discuss, conclusions and implications The research process is summarised in Figure 3.1 as follows: Figure 3.1 Overall research process 3.3 Qualitative research phase The qualitative research phase was conducted through in-depth interviews with managers in enterprises operating in different fields to understand the relationship between leadership, internal control and firm performance of Vietnamese firms Qualitative research was also carried out to assess the relevance of the research model and hypotheses in the practice of enterprises operating internal control in Vietnam 17 3.3.1 Qualitative research process 3.3.2 Grounded theory 3.3.3 Sampling 3.3.4 Data collection tools and techniques 3.3.4.1 Data collection tool 3.3.4.2 Data collection techniques 3.3.5 Conduct data collection 3.3.6 Data analysis process 3.4 Quantitative research phase The quantitative phase includes testing the model and hypotheses through the collection and analysis of survey data represented by middle managers of enterprises operating in internal control in the territory of Vietnam The author has inherited the scales widely used in previous studies to build the survey questionnaire for the quantitative phase Besides, the quantitative phase also presents how to collect data to serve and meet the requirements of the research objectives as well as provide an appropriate sampling method to be representative of the population to increase the reliability of the study This section also presents techniques and procedures for analyzing data to ensure that statistical requirements are met 3.4.1 Quantitative research process 18 3.4.2 Survey method 3.4.3 Scales All the measurement scales were adopted from the literature Specifically, the internal control structure was measured using a 25-item scale that was adopted from Jokipii (2010) This is a second-order construct with the following five dimensions: control environment (five items), risk assessment (five items), control activities (five items), information and communication (five items), and monitoring (five items) These scales are formative The internal control effectiveness was assessed using a 12-item scale that was adapted from Hunziker (2017) This scale has the following three dimensions: financial reporting (four items), operations (four items), and compliance (four items) Finally, the scale for leadership consistency, which comprises three items, was adopted from Cels (2017), whereas the five-item leadership quality scale was adopted from Zhou et al (2008) Due to the lack of objective data on firm performance in Vietnam, we used a self-assessment approach to assess firm performance, which is commonly adopted in various accounting and leadership studies (e.g., Eisenbeiss et al., 2014; Rao et al., 2015) The self-assessment and objective assessment results are strongly correlated (Venkatraman & Ramanujam, 1986) The scale of firm performance (six items), which was adapted from prior studies (e.g., Liang and Gao, 2020; Verhoef and Leeflang, 2009; Vorhies and Morgan, 2005), asked informants to compare their firm’s effectiveness with that of main competitors over the previous three years in the following aspects: market share, new customer acquisition, customer satisfaction, sales, return on investment, and overall profitability Seven anchors were included in the design of each of the scales Specifically, the verbal anchors that were assigned to firm performance ranged from one = “poor” to seven = “excellent,” whereas those that were assigned to the other variables ranged from one = “strongly disagree” to seven = “strongly agree.” Following previous research in accounting and leadership (e.g., Eisenbeiss et al., 2015; Luo et al., 2006; Wu et al., 2015; Zhu et al., 2014), we included the following four demographic variables as the control variables of firm performance: firm age (number of years in operation since establishment); firm size in terms of assets; firm size in terms of full-time employees; and ownership structure (one = “with foreign capital”; two = “without foreign capital”) 3.4.4 Sampling 3.4.5 Collect data 3.4.6 Data collection tools and techniques Chapter 3’s Conclusion 19 CHAPTER 4: RESEARCH RESULTS AND DISCUSSIONS 4.1 Qualitative research results Managers all concluded that leadership consistency is an essential factor and leadership quality plays a decisive role in internal control activities as well as all business activities In the face of increasingly volatile market conditions, business leaders must carefully consider and develop management strategies that align with internal and external characteristics These strategies help the business operate stably and ensure the completion of the internal control objectives set by the enterprise Furthermore, in times of crisis, such as under the impact of the COVID-19 pandemic, the leading role of quality leadership becomes even more important Although the pandemic has slowed trade, managers affirmed that businesses still must pay attention to internal control In particular, leaders need to be consistent in directing the implementation of internal control because, at present, internal control is still the most optimal mechanism to help enterprises control operations well in most situations Managers further emphasized that leaders must constantly improve themselves, not be afraid to take risks, and seek innovation to become qualified leaders to steer the business to overcome difficulties and maintain the effectiveness of internal control over specific periods Figure 4.1 The relationship between leadership and internal control from the point of view of managers Source: extracted results from qualitative research 20 Figure 4.2 Project map Source: extracted results from NVivo In summary, the qualitative research phase has successfully explored the positive relationship between leadership, internal control and firm performance Accordingly, the proposed model and five hypotheses (Figure 2.2) have the potential to be applied to Vietnamese conditions The research model was confirmed to be valid and applicable in the context of Vietnam after the qualitative research phase, and the hypotheses remained unchanged compared to the previously proposed model and hypothesis 4.2 Quantitative research results 4.2.1 Demographic information of participating firms 4.2.2 reliability and validity tests 4.2.3 analysis of discriminant validity 4.2.4 Multicollinearity issues and common method bias 4.2.5 The results of testing the model and hypotheses Table 4.7 Hypothesis testing results Model DV Model Model Model PERF ICE PERF ICE PERF ICE PERF 0.34 0.64 0.04 0.52 0.04 0.37 0.04 (5.70)c (7.48)c (0.47) (5.90)c (0.48) (4.99)c (0.52) IV H1 H2 ICS ICE 0.46 0.46 c (6.75) LC 0.46 c (7.06)c (6.68) 0.35 0.24 (3.97)c (2.75)c LQ 0.11 (1.75)a H4 LC × ICS 0.21 0.41 (1.81)a (5.37)c 21 LQ × LC 0.12 (2.28)b LQ × ICS -0.04 (0.46) H5 LC × LQ × 0.67 (2.86)c ICS Control Asset Employees Firm age Ownership H3 0.30 0.28 0.28 0.28 (3.96)c (3.95)c (3.98)c (3.93)c 0.10 0.16 0.16 0.16 b b (1.21) (2.01) (2.05) (2.00)b 0.04 0.04 0.04 0.04 (0.66) (0.76) (0.78) (0.73) -0.03 -0.02 -0.02 -0.02 (0.52) (0.43) (0.41) (0.42) Indirect effect Estimate LLCI ULCI ICS → ICE → PERF 0.17 0.10 0.27 0.73 0.40 c (3.79) Adjusted R2 0.28 0.40 0.40 0.53 0.40 Notes: ICS: Internal control structure; ICE: Internal control effectiveness; LC: Leadership consistency; LQ: Leadership quality; PERF: Firm performance; numbers in brackets: t-values; a, b, c: denote significance at 10%, 5%, and 1% levels, respectively (two-tailed t-test) LLCI and ULCI: Lower level of the confidence interval and upper level of the confidence interval 4.3 Discussion The results of qualitative research from managerial perspectives have shown that the success of internal control depends greatly on leadership consistency and quality Although the internal control structure can be adequately organized, it is difficult for internal control to achieve positive results if leadership is inconsistent and of low quality Internal control becomes effective when the structure is fully established and led consistently Furthermore, the impact of leadership consistency on the influence of internal control structure on internal control effectiveness is greater when the company has a quality leadership team Besides, the analysis results of 206 samples via SmartPLS v.3.3.3 confirm: (1) the measurement of latent variables in the model has high reliability; (2) the variables in the model have discriminant values and converge at an acceptable level; (3) the proposed model has a high fit with the collected data; (4) five proposed hypotheses are accepted by the results of data analysis Chapter 4’s Conclusion 22 CHAPTER 5: CONCLUSIONS AND IMPLICATIONS 5.1 Conclusion 5.2 Implications 5.2.1 Theoretical implications First, along with other studies (Le et al., Nguyen; 2021; Nguyen and Bui, 2018), the thesis has once again confirmed the importance of internal control for the operation of enterprises in emerging markets, namely Vietnam Second, the thesis contributes to creating a theoretical basis for the limited combination of leadership and internal control in the context of the emerging market of Vietnam (for example, Le et al., 2020; Nguyen , 2021.; Vu and Nguyen, 2021) More precisely, the research results have confirmed the moderating role of leadership consistency on the impact of internal control structure on internal control effectiveness - something that previous studies have not done Third, the thesis makes an essential contribution to the theoretical background when the research results show that the higher the leadership quality, the more the moderating role of leadership consistency on the impact of the internal control structure on internal control effectiveness is higher That is, the thesis has contributed to better explaining the complex nature of the relationship between leadership and internal control by proving that the higher the leadership consistency, the more conditional internal control is developed and increased effectiveness through the organization of an adequate internal control structure The thesis has provided evidence on how to transform the factors of leadership and internal control into the enhanced firm performance of enterprises through a moderating-mediation model in the context of Vietnam, an emerging economy Finally, the thesis has supported the role of cognitive consistency theory (Gawronski and Strack, 2012) in explaining the regulatory impact of leadership consistency on internal control The cognitive consistency theory will be expressed more clearly when applied to internal control activities That is, under the control of cognitive consistency, leaders will seek to maintain consistency between words and actions to build trust in employees Employees who are inspired and motivated by consistent leadership will strive to comply with regulations and work with a high sense of responsibility As a result, employee performance can be improved, and the effectiveness of internal control also increases The research results of the thesis have also confirmed the appropriateness of the resources-base view (Barney, 1991), the cognitive consistency theory (Gawronski and Strack, 2012) and the expectancy theory (Vroom et al et al., 2005) when applying research on internal control in the context of enterprises in Vietnam 5.2.2 Managerial implications Firstly, the research results on the positive mediating role of internal control effectiveness on the impact of the internal control structure on firm performance are significant for Vietnamese enterprises in allocating limited resources to optimize internal control structure Vietnamese enterprises should boldly invest resources in designing an appropriate and adequate internal control structure to promote internal control effectiveness (Pathak, 2005; Wardiwiyono, 2012), improve the value of resources (Jokipii, 2010) and improve firm performance Secondly, filling a research gap makes sense for leaders in emerging markets to promote the role of internal control components to enhance internal control effectiveness Thirdly, the synergy between leadership consistency, leadership quality and internal control will help enterprises fulfill the objectives of asset protection, efficient operation, enhanced compliance with government regulations, and improved firm performance Based on the results of the thesis, enterprises will have a basis to apply and develop a plan to recruit, train, develop and improve the quality of the leadership team in line with the development strategy of internal control and corporate strategy Enterprises need to be careful in choosing leadership positions to limit the waste of resources and minimize unforeseen losses in the future Fourth, the thesis results are meaningful 23 to leaders in emerging markets when the message tells them how to approach and develop internal control to optimize management results The requirement is that each leader himself be aware of his great mission to maintain consistency and improve quality to help internal control achieve the desired effect Fifth, leaders should seize the opportunity to develop internal control by proactively understanding employee perceptions and expectations To build effective internal control, business leaders need to pay more attention to employees' expectations and offer optimal solutions in the selection, orientation and training to have the right employees in line with the company's development roadmap Sixth, public and stakeholders' expectations for corporate governance are increasing, forcing enterprises to pay more attention to and develop internal control activities (Hay, 1993) Therefore, leaders need to clearly understand their responsibilities and mission in ensuring the good implementation of internal control to create a solid foundation for corporate governance and meet the stakeholders' expectations Finally, although internal control is considered the only mechanism by which an enterprise can achieve its stated operational, reporting and compliance objectives, developing an internal control system is an ongoing process that requires regular and timely attention from management If leaders not follow closely to understand the situation of internal control as well as delay in giving appropriate solutions, the abuse of power in internal control still has the opportunity to arise, exist and develop Leaders need to pay more attention to internal control activities to thoroughly understand negative issues and create conditions for internal control to fulfill their duties well 5.3 Limitations and future research directions First, the study has a lag between two surveys of data for two months Still, the results of the causeeffect relationship between the variables in the model also need to be considered carefully (Van der et al Stede, 2014) Other studies may use longitudinal data or experimental methods to reduce limitations in solving causeeffect relationships, a specific problem of survey data collected with cross data Second, Riessman (1993) concluded that qualitative research would provide personal and subjective perspectives However, the author has tried to overcome this problem by coordinating different measures in the research process On the other hand, the size of 16 managers (saturation) in the thesis is confirmed as appropriate However, other studies can be done with a larger sample and a variety of locations in other economic centers of Vietnam, such as Can Tho, Hai Phong, etc., to enhance the generalizability of the research results Third, this thesis only learns about leadership consistency and leadership quality as moderating variables in the model Further studies may consider other variables such as institutions, leadership experiences, leadership styles, mindfulness, competitive strategies, and accounting management system Finally, the thesis only explores the relationship between leadership and internal control in the context of businesses in the Vietnamese market Therefore, the study's findings may be limited in generalizability and applicability to other countries The managerial implications of this study should be considered carefully when applied to firms in other countries It is advisable to conduct a study to test the proposed model to provide more interesting research results Chapter 5’s Conclusion 24 CONCLUSION Leadership and internal control in emerging economies are issues that receive much attention from the international community Studies on the relationship between leadership and internal control are also very rich and diverse However, in emerging schools like Vietnam, studies examining the moderating role of leadership quality for moderating role of leadership consistency in the relationship between internal control structure and internal control effectiveness have not been exercised Filling this research gap is the basis for giving theoretical and managerial implications of the thesis Based on the resource-based view, the cognitive consistency theory and the expectancy theory, the thesis explores and tests the moderating - mediation model on the impact of internal control on firm performance in the context of businesses in Vietnam According to the characteristics of the embedded mixed method, the qualitative research results through in-depth interview data analysis from 16 managers show a positive relationship between leaders, internal control and firm performance in practicality Qualitative results are also determined by the appropriateness of the model and hypotheses in Vietnamese conditions The quantitative research results from the analysis of survey data from 206 samples demonstrated that internal control structure positively impacts firm performance through internal control effectiveness The quantitative research results also indicate that the higher the leadership quality, the stronger the impact of leadership consistency on the relationship between the internal control structure and internal control effectiveness The thesis contributes to the theoretical background in combining leadership and internal control and provides implications for promoting internal control effectiveness to positively influence the firm performance of enterprises in the Vietnam market Because above all, internal control can help businesses maintain stable operations to overcome difficulties, increase firm performance and add value to the business In addition to the obtained results, the thesis still has limitations that need to be considered and improved in future research