An Empirical Study On The Internal Control Information Disclosure Effects To IPO Under-pricing

Since the "Enron events" has been exposed, a series of financial fraud scandals has appeared, such as world communications, global communications, Kmart and many other famous companies in the world. Those companies that looks like so brilliant and flourishing were to fold up overnight, a lot of citizens have a question:What reason has cause these huge companies fall down? Finally, many people has aware of that a good company that has investment value not only should have good operating performance and development potential, but also a series of internal control management system. In China, many financial fraud scandals came out, such as Joan China source, Yinguangxia, Zhengbaiwen. All of these have reflected one thing:the company has many defects in internal control and information disclosure in internal control. In order to maintain the capital market continued to development and create a good environment for investment, the government should to establish a complete series of internal control information disclosure of standard system, so as to reflect real circumstances for a company and give a true invest information for the investor. So, the Sarbanes-Oxley Act has come into being in2002. The303and404quarter in this act has requires listed companies must disclosure their companies’information about internal control and other relevant things. Those mandatory terms make the listed company have to cost a lot of money and time to hire the accounting firm to detect their internal control condition, then issue the verification report about internal control. By this way, the listed companies have make a great progress in their internal control construction. A real and complete internal control condition was exposed in front of investors, then they have the opportunity to make use of true financial postion, operating results and cash flow to analysis for their investment and decision-making.Since the internal control information has been forced to disclosure, the company’s internal control information have sprung up, a great deal of data source has been provides for the empirical research. About the theme of the internal control study in foreign countries were mainly in three aspects:the factors of internal control disclosure, the decision factors for internal control flaw and the economic consequences by internal control defection.The main content of this paper should be the economic consequences by internal control defection to combine with factors that affect IPO under-pricing. Trying to find if the internal control information disclosure has any effection for IPO under-pricing, then testified the advantages of mandatory disclosure about internal control information to the capital market.This article has selected196IPO companies as samples in gem from2009,25December to2011, May31. Internal control information disclosure is explained variables, and the Rate of return on net assets(ROE), issue number and Success rate are control variables, and the excess return and the cumulative average return of excess are explanatory variables, then make practical analysis and come to conclusion.The main contribution of this paper:There are many research about the quality of the internal control disclosure and the influence factor for IPO under-pricing, but the study between them is rare. So, the writer wants to make up for this bank. Because the gem is a new capital market, the research samples are not enough, so there few scholars set their foot on gem in the past. The writer try to find if the internal control information disclosure has a relationship with IPO under-pricing in gem. It will prove the accuracy of mandatory of internal control information disclosure, and improve the environment of disclosure in gem.