Question

Difference between internal and external mechanism.

Answer 1

Answer:

As defined by prior literature, internal CG mechanisms are under the control of a firm (board structure, audit committee structure, internal auditors and ownership structure. On the other hand, external control are those out the control of a firm. Theoretically, it is supposed that when external mechanisms are effective, the internal mechanisms are also effective and vise versa. However, empirical research found contradictory results. In other words, some found positive relationship (complementary support) and some found negative relationship (substitution support). So, there is mixed evidence in regard the relationship between internal and external CG mechanisms.