Developing Internal Auditing Value-Adding (IAVA) Model: Unpacking Corporate Governance Mechanisms Pathways to Shareholder Value

Abstract

Corporate governance research provides inconsistent evidence on whether formal governance mechanisms contribute to shareholder value, suggesting that governance structures may require organisational capabilities that translate oversight into shareholder value-creation. This study develops and empirically validates the Internal Auditing Value-Adding (IAVA) Model that identifies the capability-specific pathways through which individual corporate governance mechanisms contribute to shareholder value. The study adopts a sequential model-development design comprising a PRISMA 2020-guided systematic evidence synthesis, theoretical integration, and theory-driven secondary mediation analysis using Hayes’ PROCESS on the survey dataset previously reported by Abudu and Syed (2025). The findings reveal heterogeneous governance–capability–value pathways. Board composition and diversity, corporate governance committees and board independence exhibit significant direct and total indirect effects on shareholder value, whereas board risk attitude operates through indirect effects only. Risk Management Performance emerges as the strongest and most consistent mediating capability across all governance mechanisms; Compliance Management Performance and Internal Resource Management Performance also consistently transmit governance effects, while Internal Control Systems Performance operates selectively, mediating only the board risk attitude–shareholder value relationship. The study advances governance and internal audit research beyond aggregate mediation by demonstrating that governance–value transmission is capability-specific rather than uniform. The IAVA Model consequently positions internal audit as a governance capability converter through which governance direction and oversight are operationalised into value-creating organisational outcomes.