Effects of Internal Control Mechanisms on Operational Efficiency of State-Owned Enterprises: Evidence from Malawi

Internal controls are crucial in ensuring the efficient utilization of resources to accomplish organizational objectives. When implemented effectively, they enhance operational efficiency. In the case of public institutions, operational efficiency is critical given that these entities deliver services paid by taxpayers and whose interest revolves around resource optimization. The study investigates the effect of internal control mechanisms on the operational efficiency of State-owned Enterprises (SOEs) in Malawi. A cross-sectional survey design was employed. Data was collected through a questionnaire and was analyzed using the least squares multiple regression model. The results showed that control environment and information and communication have significant positive effects on operational efficiency. On the other hand, although control activities and monitoring and evaluation positively influenced operational efficiency, their relationships were not statistically significant. Similarly, although risk assessment negatively influences operational efficiency, the relationship was not statistically significant. The results demonstrate the importance of a supportive environment and effective information sharing in enhancing operational efficiency in SOEs.