Research On Impact Of Corporate Governance On Effectiveness Of Internal Control: Based On Empirical

Small and medium-sized enterprises have been developing very fast since our reform and opening up thirty years ago. According to the materials offered by the State Economic and Trade Commission, the number of those enterprises which have registered in the Industrial and Trade bureau around the country has surpassed 10 million, accounting for 90% of all enterprises in our country. The total industrial output value achieved by those small and medium-sized businesses takes up 60% of that of this country as a whole and they provide 40% of the profits and taxes received by the latter. Besides, job opportunities provided by them is 75% of those in the whole country for 90% of the newly employed while its export occupies 60% of the total one. Therefore, it is quite obvious that the small and medium-sized companies have been playing an essential role in the economic growth and social development in our country.All small and medium-size enterprises which have conducted IPO in Shenzhen Stock Exchange are the research objects of this thesis because most of them have been developed from private enterprises facing risks and challenges undoubtedly. Corporate governance and internal control, as important effective means of avoiding risks, have attracted more and more attention from supervisors and management of enterprises. Relevant researches have fully proved that there is a certain resonable relationship between corporate governance and internal control. This thesis attempts to find an optimal model concerning the two aspects through conducting theoretical argumentation and empirical analysis of the effectiveness of internal control from the perspective of factors constituting corporate governance structure. It mainly includes the following contents:Firstly, literature review. To begin with, this thesis makes a systematic and comprehensive introduction to theorectical concepts such as corporate governance and its structure as well as internal control and so on. It especially gives its own opinion on the difference between corporate governance and its structure, that is, the former is a systematic, comprehensive and dynamic process while the latter is a static institutional arrangement. Then it offers judgements on the effectiveness of internal control and the ananlysis of the logic relationship between corporate governance and internal control. Besides, it also conducts relevant reseaches from the angles of auditing and logics and proposes three indexes measuring the effectiveness of internal control. Secondly, empirical analysis of the impact of corporate governance on effectiveness internal control in those enterprises. At first, it makes a detailed and all-round analysis of the charactheristics of those companies from the angle of statistics. Then, it executes empirical test on the influence of corporate governance on effectiveness internal control in terms of three indexes regarding that effectiveness. The main conclusions indicate that:(1) The controlling power of the biggest shareholder (Kz Value) has no significant influence on the effectiveness of internal control. (2) Among all those businesses, except that the reliability of the corporate financial reports issued by actually state-controlled companies are obviously superior to those of the others, there is no significant difference between the other two indexes judging the effectiveness of internal control. (3) The percentage of employees who have earned a three-year college degree, representing the index measuring the importance attached to the employed by the corporate management, has significant impact on the effetivenss of internal control. (4) The scale of the board of directors has significant effect on the reliability of corporate financial report while having on significant impact on corporate performance and obedience to laws and rules. However, that scale doesn't have significant influence on the effectiveness of internal control in terms of the effectiveness as a whole. (5) The scale of board of supervisors has much significant impact on the reliability of corporate performance and financial report except on corporate laws and rules, thus it can be concluded that the scale has impact on the effectiveness of corporate internal control to some degree. (6) The chairman of the board who also takes the position of CEO has a little promoting impact on corporate performance and significant inhibiting effect on the reliability of financial report, which shows that the chairman of the board and CEO structure in corporate governance has very little influence on the effectiveness of corporate internal control.(7) The frequence board of directors and board of supervisors meetings has negative effects on corporate permance and significant promoting impact on the reliability of financial report, while it has no significant relationship with the following of laws and rules, which reveals that this kind of governing feature also has no significant influence on internal control. (8)The management's attitude towards risks has significant U style relationship with the effectivenss of internal control.Thirdly, the implications of policies and thoughts on corporate governing mechanism. It provides corresponding improvements for corporate governance on the effectiveness of internal control in those conpanies with empirical conclusions from perspectives of all key factors of corporate governance structure respectively.The effectiveness of corporate governance on internal control in small and medium-sized enterprises is a complicated issue covering a wide range of contents. This thesis just makes a preliminary and tentative exploration on the issue on the basis of researches conducted by predecessors. Undoubtedly, it has various flaws, so it needs to be continuously improved and perfected in later researches.