An Empirical Study：Effectiveness Of Internal Control And Cost Of Equity Of Listed Companies

In June2008, the Ministry of Finance jointly issued by five ministries,"the basicnorms of internal control"(the "Basic Standards"), created the development of China’snew era of internal control.While Chinese securities market after ten years ofdevelopment, more and more perfect the internal control of listed companies, listedcompanies in China, but the overall effectiveness of internal control is still notoptimistic. Therefore, the effectiveness of internal control as theorists, practitionersand the focus of regulatory authorities, and the cost of equity financing decisions oflisted companies are important consideration. The effectiveness of internal control oflisted companies on the cost of equity had what effect our attention.Although there aresome existing theory researches of the effectiveness of internal control and the cost ofequity, the relationship between the them have no further argument.This paperempirically analyzes the effectiveness of internal control for the impact of cost ofequity of listed companies,which is designed to improve our internal controlmechanisms to make recommendations.In order to study the effectiveness of internal control of listed companies with thepotential correlation between the cost of equity, Firstly, this paper defines that used inthe study the effectiveness of internal control definitions and measurement methodsand describes the empirical research in the selected method of calculating the cost ofequity. This article listed companies in China to build a comprehensive evaluation ofthe effectiveness of internal control index (ICQ), covering China’s "Internal ControlStandards" under the four objectives of internal controls, and using paired-samplestest the sensitivity of the indicators to prove that this paper targets feasible. Secondly,the effectiveness of internal control from the economic consequences are analyzed therelevant theory, this first assumption: the more effective internal controls, the lowerthe cost of corporate equity, and analyzed the impact of listed companies, the cost ofequity-related factors influencing and as a control variable. Again, this year China’svoluntary disclosure in2009and2010listed companies with internal control samplesfrom the empirical point of view of the effectiveness of internal controls on listedcompanies share the cost impact on the effectiveness of internal controls listedcompanies in China share the cost impact on the test. Finally, we proposerecommendations To improve the effectiveness of internal control of listed companiesand improve our internal control information disclosure mechanism, reduce the costof equity.In this paper, empirical studies have found an effective internal control of listedcompanies which can improve the quality of accounting information, and thus reducethe cost of equity. The significance of this research, through empirical studies haveshown the effectiveness of internal control the cost of equity of listed companies,making the listed companies to improve internal control validity by reducing the costof equity of spending more scientific, targeted, systematic and feasible。...