Study On Relationship Between Information Transparence Of Internal Control And Equity Agency Cost

A combination of modern economic theory and contemporary accounting theory is accounting information disclosure, which quality can reduce the information asymmetry of the capital market, so as to improve resource allocation, and promote sustained economic growth. But the accounting fraud news of the giant firms repeatedly damaged the interests of investors, once questioned the usefulness of accounting information. And in order to protect the interests of the investors, how to improve the quality of accounting information has become the focus of people’s attention. Also based on that reason, research on internal control started to become hot. And as an important source for inner control information of listed company, the importance of information disclosure of internal control is also increasingly highlighted.With this in mind, all countries in the world have enhanced information disclosure of internal controls of listed companies. After Enron, United States Government immediately launched the Sarbanes-Oxley Act, not only with company management report on internal control over financial reporting, and for a certified public accountant to confirm the accuracy of management reports. China have respectively launched "Internal Control Guidelines for Shanghai Securities Exchange Listed Company"(2006),"Internal Control Guidelines for Shenzhen Securities Exchange Listed Company"(2006),"Basic Specification for Enterprise Internal Control"(2008),"Supporting Guidelines for Enterprise Internal Control"(2010), these all have requirements on the disclosure of internal control self evaluation report, and on the audit for the effectiveness of financial report internal control.Through the statistics of internal control information transparency from main board A-share manufacturing listed company during2008～2010, we can found that the overall information transparent degree of internal control still lower, currently over one-third of company has not been disclosure internal control self evaluation report. It shows these listed companies lack the motivation for information disclosure of internal control. Statistics by year, we found that although "Basic Specification for Enterprise Internal Control" introduced in2008has promoted the information transparency degree of internal control of listed companies, yet overall not much has changed in three years, internal control information transparency of listed companies has not markedly improved.How to effectively improve the information transparency of internal control of listed companies, so as to protect the interests of investors, increase the efficiency of capital markets, has been the academic efforts. However, from the relevant research literature at home and abroad, we can see that academia is more concerned about the present situation of internal control information disclosure of the listed company and its influencing factors, less economic consequences of internal control information transparency. For improving the formulation of the relevant policies of internal control information disclosure of listed companies, strengthen supervision of capital markets and protect the interests of foreign investors, the correlation research between information disclosure of internal control and agency cost have important theoretical and practical significance,So-called proxy problem refers to, as the objective is inconsistent between principal and agent, in situations of uncertainty and asymmetric information, principal is difficult to observe the behavior of agent, then the agent will probably make the acts detrimental to the client interests. From the financial point of view, corporate agent problem is divided into equity and debt agency problems. And equity agency problems can be broken down into two categories again:one is the traditional interest conflict between shareholder and management; another is the interest conflict between controlling shareholders and minority shareholders. With the corresponding there are also two categories of equity agency cost. Due to data constraints, this article is only analysis for two types of equity agency costs. But for the first class equity agency cost, we mainly discussed the self-interest income of management, for the second class equity agency cost we mainly discussed the private benefits of controlling shareholder from control right. As to the shareholders or minority shareholders, these revenue of management and controlling shareholders are their losses, becomes one part of equity principal-agent cost. Under the internal control information, the users can understand the related information about the construction and running of enterprise internal control, so as to evaluation the performance situation of the trustee economic responsibility of management authorities, and forecast future efficiency of business activities, security of assets, and reliability of financial report, and also to make economic decision about investment and credit. In addition, high quality of internal control information disclosure can improve enterprise internal control. Increasingly sophisticated internal control forms good corporate governance. On this basis, presented research hypothesis1:the higher information transparency of internal controls about the company, the less equity agency cost between shareholders and the management; and research hypothesis2:the higher information transparency of internal controls about the company, the lower agency costs between controlling shareholders and minority shareholders.As1,626observations from main board A-share manufacturing listed company during2008-2010for sample, after description sexual statistics, group comparison analysis, multiple regression analysis and cautious sexual analysis, we found that:assumptions1established, strengthening information transparency of internal control helps constraints self-interest behavior of management, and suppression the first class equity agent cost; we have no directly evidence indicates that assumptions2established, our empirical evidence does not prove that strengthening internal control information transparency can effective constraints public company occupied funds from controlling shareholders, but we have evidence that the strengthening of internal control information transparency constraints listed company’s non-operating funds. As the controlling shareholder’s tunneling is part of non-operating funds, so we can reasonably believe that the strengthening of internal control information transparency constraints non-operating funds occupied form controlling shareholders. In General, the information disclosure of internal control is effective corporate governance, the higher internal control information transparency of listed companies, the more he can reduce agency conflicts, thereby inhibiting agent costs.In internal control information disclosure area, this research made follows contribution:first, this paper systematically analysis the relationship between the first, second class equity agent cost and internal control information transparency, covered the experience data blank of internal control information disclosure, and in discussion of the relationship between internal control information transparency and agent cost, we have considered to different variance problem and self-bias problem, to eliminate their effect, this paper respectively does sound sexual regression and two step regression, the empirical results are more reliable; Secondly, the internal control information transparency standards provided in this article is straightforward, having good representation and rationality; Finally, the statistics analyses of the current internal control information transparency in this article, provides updated data, and reference information for further regulatory enhance.