Research On The Effect Of Internal Control Effectiveness Or Enterprise Value

After years of development,the internal control construction of Chinese enterprises has made some remarkable achievements.The system documents and supporting guidelines introduced by relevant departments of the state play a vital role in the construction of enterprise internal control.But can high-quality internal control achieve the target effect expected by the regulatory authorities?There is no definite answer to this question.The practical circles have issued such a question:Why do some enterprises exert more efforts on internal control,while the performance of enterprises is worse?This problem has aroused the attention and thinking of academic and practical circles.Some enterprises reflect that the implementation of internal control will increase the cost of enterprises.From the perspective of cost-benefit,the revenue of internal control construction is negative.Based on these phenomena,it is impossible to judge the actual effect of the effectiveness of internal control on enterprise value,so it is necessary to test the internal impact mechanism through empirical research.At the same time,internal control does not directly create value,but needs a certain path to give play to the mechanism of value growth.If we can reveal the action path of the effectiveness of internal control affecting enterprise value,it will have important positive meaning to regulatory authorities and enterprise management authorities.But at present,there is no literature in academic circles that can answer the above questions.Based on this,this paper attempts to build a more scientific and reasonable evaluation model of internal control effectiveness,reveal the relationship between internal control effectiveness and enterprise value after controlling endogenous problems,and find an effective path for internal control effectiveness to affect enterprise value.This paper mainly consists of six chapters,and the main contents of each chapter are as follows.The first chapter is introduction.This section expounds the background and significance of the topic,analyzes the research objectives and framework of the paper,and points out the research methods,technical roadmap and the possible innovations.The second chapter is literature review and comment.This chapter defines the main concepts,reviews the classical theories,summarizes the influencing factors of enterprise value,and makes a literature review of the relationship between internal control and enterprise value.The third chapter is the evaluation of the effectiveness of the internal control of listed companies.In this chapter,the evaluation index system of the effectiveness of internal control is constructed,the weight of the evaluation index is determined,and the evaluation model of the effectiveness of internal control is established.The fourth chapter is the relationship between the effectiveness of internal control and enterprise value.This chapter empirically tests the influence of internal control effectiveness on enterprise value in theory,and investigates different effects of internal control effectiveness on enterprise value in enterprises with different property rights,agency conflicts and institutional environments.The fifth chapter is the research on the effect path of the effectiveness of internal control on the value of the enterprise.This chapter sets out from five paths:investment efficiency,enterprise financing,operation efficiency,financial information quality and operation risk,constructs the action path model of internal control effectiveness affecting enterprise value,and uses empirical analysis method to verify the effectiveness of these five paths.The sixth chapter is the research conclusions and policy recommendations.This chapter summarizes the main conclusions of the paper,points out the direction of the future research,and puts forward some policy suggestions.Through theoretical analysis and empirical test,this paper draws the following main conclusions:(1)On the basis of reviewing the theory,system and practice of internal control,this paper constructs the evaluation index system of internal control effectiveness,determines the subjective and objective weights of each evaluation index by using the group G1coefficient of variation method,combines the weights by using the ideal scheme method,and establishes the evaluation model of internal control effectiveness.This paper makes a comparative analysis of the effectiveness of internal control based on goal orientation and factor orientation,examines the relationship between internal control effectiveness and internal control defects,earnings quality and enterprise violations,and confirms the effectiveness of the evaluation model.Finally,this paper finds that the effectiveness of internal control of listed companies in China is increasing year by year from 2009 to 2018.The effectiveness of internal control of listed companies in eastern China is significantly higher than that in central and western China,and that of state-owned listed companies is significantly higher than that of non-state-owned listed companies.(2)This paper empirically examines the impact of internal control effectiveness on enterprise value,weakens endogenous problems that may exist in the research process by using simultaneous equations,3SLS and fixed effect models,and makes heterogeneity analysis based on property rights,agency costs and institutional environment.It is found that there is a significant positive correlation between the effectiveness of internal control and enterprise value in listed companies,and the improvement of the effectiveness of internal control is helpful to promote the growth of enterprise value.This conclusion is still valid after controlling endogenous problems.Based on the heterogeneity analysis of property rights,agency costs and institutional environment,the results show that the marginal effect of the effectiveness of internal control on the value of state-owned enterprises is greater than that of private enterprises.The effectiveness of internal control can reduce the damage of agency problem to enterprise value.In the regions with poor institutional environment,the effectiveness of internal control of listed companies has a greater effect on the promotion of enterprise value than in the regions with higher institutional environment.(3)Through literature review,this paper extracts five paths that the effectiveness of internal control affects enterprise value,and tests the effectiveness of each path through empirical analysis.The results show that investment efficiency,enterprise financing,operating efficiency and enterprise risk are effective ways for the effectiveness of internal control to affect enterprise value.Specifically,the effectiveness of internal control can promote the value growth of enterprises by improving their investment efficiency and reducing their financing constraints,financing costs and risks.The quality of financial information is not an effective way for the effectiveness of internal control to affect enterprise value.The innovations of this paper mainly include the following three aspects:(1)Guided by internal control objectives,this paper constructs an internal control effectiveness evaluation index system,gives subjective and objective weights to internal control effectiveness evaluation indexes by using group G1-coefficient of variation method,determines combination weights by using ideal scheme method,and establishes an internal control effectiveness evaluation model,which makes up for the defects of incomplete indicators and ignoring the importance of different indicators in traditional research to a certain extent.After the validity test,it is found that the model is still robust,which provides a reliable measurement tool for the subsequent research on the effectiveness of internal control.(2)The economic consequences of the effectiveness of internal control are deeply discussed,and the internal mechanism of the effectiveness of internal control on enterprise value is analyzed.Simultaneous equations,three-stage least square method,fixed effect model and other methods are used to control the endogenous problems in traditional research,which is helpful for academic circles to deeply understand the internal relationship between the effectiveness of internal control and enterprise value.(3)Through theoretical analysis,five possible paths of internal control effectiveness affecting enterprise value are found out,and an action path model of internal control effectiveness affecting enterprise value is constructed.The effectiveness of these five paths is verified by empirical analysis.The results show that the effectiveness of internal control can increase the value of enterprises by improving investment efficiency and operating efficiency,and reducing financing constraints and financing costs.Clarifying the internal transmission mechanism of internal control effectiveness affecting enterprise value is helpful for academic circles to understand the governance mechanism of internal control effectiveness,and enriches the literature system of research on economic consequences of internal control effectiveness.