The Effect of Internal Control on Financial Performance of Bgi Ethiopia: the Mediating Role of Balanced Scorecard
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Date
2025-06-11
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A.A.U
Abstract
This study investigates the effect of internal control on the financial performance of BGI Ethiopia and explores the mediating role of the Balanced Scorecard (BSC). Rooted in agency theory, resource-based view, and contingency theory, the study analyzes the interrelationship between control environment, risk assessment, control activities, information and communication, and monitoring activities as components of internal control. Financial performance is assessed using quantitative indicators such as profitability, efficiency, and strategic alignment. The research employs a quantitative approach with a cross-sectional design and utilizes structured questionnaires distributed to 297 employees of BGI Ethiopia. Then
Regression and mediation analyses using SPSS were conducted to test the hypothesized relationships. The results indicate that internal control significantly influences financial performance and that BSC partially mediates this relationship. The BSC’s four perspectives including financial, customer, internal process, and learning and growth and translate strategic
objectives into measurable outcomes. The descriptive and explanatory type of research is purposely to provide an accurate representation of observation and mapping a piece of ground of particular observable facts. Findings suggest that integrating internal control systems with strategic management tools like BSC enhances performance and accountability. The variance
accounted for (VAF) is 58.93%, indicating partial mediation BSC mediates significantly between IC and FP is accepted. Empirical research supports that robust internal controls help align managerial behavior with shareholder value maximization, thereby improving financial performance This study provides practical implications for business managers, scholars, and
policymakers by highlighting the strategic value of effective internal controls and performance measurement frameworks in improving organizational outcomes. In addition to that, it provides a Recommendation based on conclusion.