Do internal controls improve operating efficiency of universities?

Improving operating efficiency is one objective of internal controls (IC). This paper investigates the relationship between IC implementation and operating efficiency of universities. Using data from questionnaire survey and from the field, this study measures IC implementation and applies data envelopment analysis to estimate operating efficiency of 99 universities in Taiwan. The results indicate that IC implementation has a positive but insignificant association with overall efficiency as well as teaching-related efficiency, but has a negative and significant association with research-related efficiency. Dividing the sample into public and private universities, the analysis indicates that for public universities, IC implementation has no significant association with any of the three measures of efficiency. But, for private universities, there is a positive and significant association between IC implementation and teaching-related efficiency. The association between IC implementation and research-related efficiency is negative and significant.