When internal organizational factors improve detecting corruption in state-owned companies

Abstract

Purpose The phenomenon of corruption requires extra handling to achieve zero corruption. The purpose of this paper is to examine the integrated governance, risk management and compliance (GRC) implementation, the quality of internal audits and management's commitment to improving the ability to detect corruption and its impact on the company's financial performance. Design/methodology/approach This paper used primary and secondary data. Financial statement data and survey results from participants in 69 state-owned companies were analyzed using the Partial Least Square method. Findings There was a positive and significant effect of the integrated GRC implementation, quality of internal audit and management's commitment to increasing the organization's internal capability in detecting corruption. However, the failure to detect corruption mediates the effect of management commitment on financial performance. Besides, the organization's three internal factors could be better because their functions could be more optimal and require further improvement. Research limitations/implications State-owned companies are continuing to be restructured, so these results can be helpful for now. However, they must update continuously with developments related to the composition and classification of state-owned companies. Practical implications Organizations can improve their ability to detect corruption in the workplace by using an early warning system such as the integrated GRC, internal audit quality and a high commitment from management. Originality/value To the author's limited knowledge, empirical research on integrated GRC implementation, internal audit quality and management commitment are still rare if they improve the detection of corruption ability. It uses the factors that cause corruption in the fraud hexagon to analyze the financial performance.