Empirical Research On The Effectiveness Of The Corporate Governance To The Internal Control

After more than ten years development, family listed companies have become a new power in our national economic and attracted more and more attention. Numerous researches indicate that corporate governance structures have an important impact on the effectiveness of the internal control. Zhejiang Province has the largest quantity of family listed companies. Family listed companies in Zhejiang Province develop rapidly and have great representation. Based on the theories of corporate governance and internal control, this article analyses the factors of corporate governance of family listed companies in Zhejiang Province which are quite big to the internal control influence. And then, the author gives some advices to improve the governance and the effectiveness of the internal control.Firstly, combined with the feature of the mode of British and American corporate governance, Japan and German corporate governance and Southeast Asia corporate governance, this thesis gives the connotation of the family listed companies. It analyses the present situation and characteristics of corporate governance of family listed companies in Zhejiang Province. Then, it reviews and summarizes the studies of the corporate governance and internal control in the past. According to the main mode of corporate governance in the world, this paper studies the impact of the corporate governance feature on internal control of family listed companies in Zhejiang Province.On the basis of theoretical analysis, the article uses the Principle Component Analysis (PCA) to select the main factors and calculates the comprehensive scores of internal control system. Then it uses the measurement method of liner regression to research the relationship between the corporate governance and internal control of family listed companies in Zhejiang Province. For internal control variable, the indexes of assurance report on internal control, laws and regulations, management fee rate, assets turnover ratio, return on equity, main business profit rate and earnings per share which are representative and universal applicability are selected. For the corporate governance structure variables, seven explanatory variables have been chosen, including the proportion of the largest shareholders, the proportion of top five shareholding, the board size, the ratio of independent directors and whether the position of chairman and general manager is held by one family member, executives annual salary and the scale of the board of supervisors. Descriptive statistics and regression analysis of measurement results show that the proportion of the largest shareholders affect the internal control negatively; the position of chairman and general manager isn't held by one family member, executives annual salary and the scale of the board of supervisors affect the internal control positively. Then, this paper chooses natural logarithm of total assets as control variable. However, empirical result of multiple linear regression suggests that the board size, the ratio of independent directors and the proportion of top five shareholding have uncertain impact on its internal control. This result is partly explained by our imperfect system of corporate governance, internal control and market environment.According to the conclusions of theoretical analysis and empirical tests, the author makes some recommendations from the point of view of how to improve family listed companies'governance structure and the effectiveness of the internal control in Zhejiang Province, including establishing a scientific concept of family enterprises, cultivating rational corporate governance and family enterprise culture, improving the system of board and independent directors, optimizing the ownership structure of family listed companies in Zhejiang Province, and so on.