F. Greg Burton

The Effects of Using the Internal Audit Function as a Management Training Ground or as a Consulting Services Provider in Enhancing the Recruitment of Internal Auditors

This paper examines factors that influence job applicants’ willingness to apply for positions in internal auditing. We predict and find evidence that job applicants are dissuaded from applying for internal audit positions. In two separate experiments involving participants at seven universities, we discover that this phenomenon is most prevalent for applicants with business experience. Experienced applicants are 20 and 33 percent less willing to apply for a position if it is labeled as “internal audit�? versus “accounting�? in the two experiments, respectively. In addition, we find that the only experimental condition that increases interest in applying for an internal audit position for experienced applicants occurs when the position advertises the combination of (1) a short stint in internal auditing and then a move from internal audit into a management position and (2) work primarily related to consulting services rather than assurance services. As a potential explanation for these findings, we find evidence that participants believe other business professionals have negative stereotypes of internal auditing — which likely dissuade potential job applicants from applying to work in internal audit. The results should prove informative to practitioners, internal audit professional organizations, and business professionals concerned with high quality corporate governance.

Entrepreneurial Success: Differing Perceptions of Entrepreneurs and Venture Capitalists

The recent credit crisis has made it more difficult for entrepreneurs to find funding. It is increasingly important for entrepreneurs to know what is important to venture capitalists (VCs) when they make their funding decisions. The authors interviewed entrepreneurs and VCs to determine the traits these groups perceive as necessary for entrepreneurial success. They find that entrepreneurs cite traits inherent in their nature significantly more than VCs. Additionally, entrepreneurs who do not have previous VC funding experience differ significantly from VCs in identifying important factors for VC funding. In contrast, entrepreneurs with previous VC funding experience do not differ from VCs in identifying important funding decision factors.

Dominant Owners and Financial Performance of Continental European Firms

We examine countries in continental Europe to further refine the distinction between ability to control and actual control and whether a particular distinct shareholder distribution relates to company performance. As an extension to the existing literature, we provide a more nuanced taxonomy of controlling shareholder systems in different countries. In particular, we (1) operationalize the definition of “dominant” owner, to make this measure less sensitive to the disparity of voting and cash flow rights and (2) empirically test the active power of the dominant owners by investigating whether the economic performance of the firms from different countries is consistently affected by the nature of the company’s dominant owner. After disaggregating the overall sample by specific ownership type and by country, we find statistical support for the relationship between dominant ownership and performance being strongly positive for firms in which banks and families/individuals are dominant owners to being inversely related (p ≤ 0.1) when corporations are the dominant owners. Additional analysis discloses an even more complicated picture, suggesting that countries are not homogenous in terms of their ownership landscapes, and, hence, their effects on performance.