Does State Surveillance Benefit a Firm’s Internal Control?

This study examines whether state surveillance impacts a firm’s internal control. Based on the staggered installation of surveillance cameras in China, our regression results suggest an improvement in internal control for firms located in the surveilled cities. As further analyses indicate, the surveillance impact arises from positive migration externalities, watching-eye effects, and more efficient law enforcement. Despite state surveillance designed to protect citizen, it has tangible and unintended economic consequences for corporate internal control.