GABS

Article Details

Vol. 3 No. 1 (2026): July

The Impact of Disclosing the Quality of the Internal Control System on Improving Institutional Performance: A Field Study on the Iraqi Banking Sector

https://doi.org/10.35912/gabs.v3i1.4294
23 Jun 2026

Abstract

Purpose: This study investigates the impact of disclosing the quality of the internal control system on improving institutional performance in the Iraqi banking sector, addressing the critical challenge of inadequate governance transparency amidst the Central Bank of Iraq's comprehensive reform program (2023–2025).

Methodology: A descriptive-analytical and field-based approach was adopted. A structured questionnaire employing a five-point Likert scale was administered to a purposive sample of 285 respondents across Iraqi commercial, private, and Islamic banks, encompassing executive managers, financial managers, internal auditors, and audit committee members. Data were analyzed using descriptive statistics, Pearson correlation, multiple regression, and structural equation modeling via SPSS and AMOS.

Results: The five COSO framework components—control environment, risk assessment, control activities, information and communication, and monitoring—collectively explained 61.8% of the variance in institutional performance (R² = 0.618, F = 89.4, p < 0.001). Control activities emerged as the strongest predictor (? = 0.311), while information and communication recorded the lowest disclosure level (mean = 3.48), reflecting digital transformation gaps.

Conclusions: Transparent disclosure of internal control quality exerts a statistically significant positive influence on institutional performance. Private banks demonstrate higher disclosure levels in control activities and information systems, while government banks maintain comparative strength in the control environment component.

Limitations: The study is constrained by its cross-sectional design, geographic focus on Iraq, and reliance on self-reported perceptions, which may not fully capture objectively verifiable disclosure practices across the entire banking sector.

Contributions: This research provides empirical evidence from an emerging economy undergoing institutional reform, offering a context-specific framework for banking regulators and practitioners to enhance internal control disclosure and governance standards in alignment with international benchmarks.

Keywords

Corporate Governance COSO Framework Institutional Performance Internal Control Quality Iraqi Banking Sector

How to Cite

Mousa, H. H. (2026). The Impact of Disclosing the Quality of the Internal Control System on Improving Institutional Performance: A Field Study on the Iraqi Banking Sector. Global Academy of Business Studies, 3(1), 43–56. https://doi.org/10.35912/gabs.v3i1.4294

Download Citation

Endnote/Zotero/Mendeley (RIS) BibTeX

References

  1. Al-Husseini, M. J., & Nasir, J. A. (2022). The impact of market risks on a sample of Iraqi commercial banks. Al-Ghari Journal of Economic and Administrative Sciences, 18(4), 593-612. https://doi.org/10.36325/ghjec.v18i4.12374
  2. Al-Kafi, A. S., & Ibrahim, T. F. (2020). The impact of information technology on the effectiveness of the internal control system in Libyan commercial banks. Economic Studies Journal, 3(4), 1-27..
  3. Al-Mawla, A. K. (2024). The dialectical relationship between internal and external auditing in Iraqi banks: Challenges of integration. Journal of Management and Economics, 41(3), 220-240. https://doi.org/10.31272/jme.v41i3.1034
  4. Al-Moussawi, N. H., & Al-Banna, Z. M. M. (2023). Banking awareness and its impact on the rigidity of capital structure: An analytical study of a sample of Iraqi commercial banks. Al-Ghari Journal of Economic and Administrative Sciences, 19(2), 611-632. https://doi.org/10.36325/ghjec.v19i2.13691
  5. Al-Tamimi, J. H. (2023). The impact of external auditing on the quality of performance of Iraqi banks. World Economic and Financial Bulletin, 18, 82–87.
  6. Ali, S. S. (2023). Accounting dimensions of corporate governance and its impact on risk management in Iraqi insurance companies. Journal of Economics and Business Applied Research, 5(5), 1-22. https://doi.org/10.58205/jebar.v5i5.14
  7. Central Bank of Iraq. (2024). Early Warning Report for Assessing the Banking Sector, First Quarter 2024, Issue No. 27. Central Bank of Iraq, Baghdad.
  8. Cho, E., & Kim, S. (2015). Cronbach's coefficient alpha: Well known but poorly understood. Organizational Research Methods, 18(2), 207-230. https://doi.org/10.1177/1094428114555994
  9. Cohen, J. R., Krishnamoorthy, G., & Wright, A. M. (2020). Enterprise risk management and the financial reporting process: The experiences of audit committee members, CFOs, and external auditors. Contemporary Accounting Research, 37(2), 1-41. https://doi.org/10.1111/1911-3846.12560
  10. COSO. (2023). Building trust and confidence through the COSO internal control – Integrated framework: Internal controls over sustainability reporting (ICSR). Committee of Sponsoring Organizations of the Treadway Commission, New York.
  11. Creswell, J. W. (2014). Research design: Qualitative, quantitative, and mixed methods approaches (4th ed.).
  12. Demerjian, P. R., Lev, B., Lewis, M. F., & McVay, S. E. (2023). Management quality and the informational role of accounting. Journal of Accounting and Economics, 76(1), 101556. https://doi.org/10.1016/j.jacceco.2023.101556
  13. Field, A. (2013). Discovering statistics using IBM SPSS statistics (4th ed.).
  14. Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2019). Multivariate data analysis (8th ed.).
  15. He, M., Song, G., & Chen, Q. (2023). Fintech adoption, internal control quality and bank risk taking: Evidence from Chinese listed banks. Finance Research Letters, 57, 104235. https://doi.org/10.1016/j.frl.2023.104235
  16. He, Z., Li, X., Wang, Y., & Zhang, T. (2025). COSO-based internal control and comprehensive enterprise risk management: Institutional background and research evidence from China. Encyclopedia, 5(3), 106. https://doi.org/10.3390/encyclopedia5030106
  17. HHL Legal Advisors. (2025). Iraq banking reform: CBI modernization and what businesses need to know. Retrieved from https://hhl-iq.com/iraq-banking-sector-reform-cbi-modernization-business-guide/
  18. Idan, H. Z., Hanani, N., Rapani, A., & Khalid, A. A. (2021). The effect of corporate governance attributes on corporate social responsibility disclosure in Iraqi companies: A literature review. Journal of Governance and Integrity, 5(1), 1-18. https://doi.org/10.15282/jgi.5.1.2021.5780
  19. Islamic Financial Services Board. (2024). Islamic financial services industry stability report.
  20. Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360. https://doi.org/10.1016/0304-405X(76)90026-X
  21. Mead, A. D. (2019). Psychometric reliability: Definition, estimation, and application. In Wiley StatsRef: Statistics Reference Online.
  22. Nunnally, J. C., & Bernstein, I. H. (1994). Psychometric theory (3rd ed.).
  23. Parsons, S., Kruijt, A. W., & Fox, E. (2019). Psychological science needs a standard practice of reporting the reliability of cognitive-behavioral measurements. Advances in Methods and Practices in Psychological Science, 2(4), 378-395. https://doi.org/10.1177/2515245919879695
  24. Rashid, A., Akmal, M., & Shah, S. M. A. R. (2024). Corporate governance and risk management in Islamic and conventional financial institutions: Explaining the role of institutional quality. Journal of Islamic Accounting and Business Research, 15(3), 466-498. https://doi.org/10.1108/JIABR-12-2021-0317
  25. Regulation, disclosure, and the displacement of internal governance in Saudi banks. (2025). Journal of Risk and Financial Management, 18(12), 705. https://doi.org/10.3390/jrfm18120705
  26. Sekaran, U., & Bougie, R. (2016). Research methods for business: A skill building approach (7th ed.).
  27. Tamimi, O. Y. (2021). The role of internal audit in risk management from the perspective of risk managers in the banking sector. Australasian Accounting, Business and Finance Journal, 15(2), 114-129. https://doi.org/10.14453/aabfj.v15i2.8
  28. Tang, W., & Tang, M. (2025). Internal control effectiveness, textual risk disclosure, and their usefulness: US evidence. Advances in Accounting, 53, 100531. https://doi.org/10.1016/j.adiac.2021.100531
  29. Tran, V. T., & Nguyen, T. H. (2024). Internal audit quality and bank financial performance: Evidence
  30. from Southeast Asian emerging markets. Journal of Risk and Financial Management, 17(6), 225. https://doi.org/10.3390/jrfm17060225
  31. Wang, Y., Zhang, L., & Chen, H. (2024). Internal control weakness disclosure and cost of debt: Evidence from emerging markets. International Review of Financial Analysis, 94, 103271. https://doi.org/10.1016/j.irfa.2024.103271
  32. Yusuf, M., & Mulyani, S. (2024). Internal control system quality and organizational performance in public sector entities: A systematic literature review. Journal of Public Budgeting, Accounting and Financial Management, 36(2), 178-196. https://doi.org/10.1108/JPBAFM-09-2023-0115
  33. Zhao, X., Chen, R., & Liu, Y. (2024). Digital transformation, internal control quality and bank performance: Empirical evidence from China. Finance Research Letters, 65, 105607. https://doi.org/10.1016/j.frl.2024.105607
  34. Zhou, K. Z., Gao, G. Y., & Zhao, H. (2023). State ownership and firm performance under institutional constraints: The signaling role of internal control quality. Management and Organization Review,19(1), 34-59. https://doi.org/10.1017/mor.2023.11

Authors

Hasan Hadi Mousa
Al-Bayan University, Baghdad, Iraq

Downloads

View PDF

Statistics

Downloads

Download data is not yet available.

Issue

Vol. 3 No. 1 (2026): July
Section: Articles
WhatsApp Instagram Facebook LinkedIn Email