An Empirical Research On The Impact Of Executive Characteristics On The Quality Of Internal Control

Because of the failure internal control, many companies bankrupt.Enron was the representative of a series of mega-companies. Then, the United States enacted the SOX and set up the U.S. Public Company Accounting Oversight Board (PCAOB) in2002.Since then, the internal control was sought by the national regulatory authorities. They made some relevant regulations and documents to improve internal control and supervise domestic listed companies."A notice on good internal control assessment of the securities company" issued by the Securities Regulatory Commission in2001was a good example. In2008, they also released the "basic norms of internal control". It includes six chapters and fifty terms, which clearly defined that "The specifications mentioned in the internal controls should be implemented by the corporate board of directors, board of supervisors, managers and all staff and aimed at achieving the objectives of internal controls in the process. The objectives of internal controls is reasonable enterprise management, legal compliance, security of assets, financial reporting and related information should be true and complete, and improve operational efficiency and effectiveness, to promote enterprise’s development strategy."So it is easy to find that the company’s senior managers characteristics have closely relationship with the internal control’s establishment, implementation, monitoring and implementation.However, after years, Hambrick and Mason’s the senior echelons theory makes our eyes bright. The theory test the relationships of the characteristics of top managers and strategic choice, organizational performance. It highlighted the role of the demographic characteristics to the managers cognitive model, as well as the impact on organizational performance. Jiang Fuxiu(2009) and Liu Qiliang(2010) use the theory to analyze the relationship between the background and the characteristics of the executives of listed companies and the company’s transition investment and financial restatement behavior in the first time. The results are very distinct. Recalling the empirical research literature on the internal control at home and abroad, it can be attributed to three aspects:disclosed voluntary internal control, the economic consequences of the decision factors and internal control deficiencies in internal control deficiencies of these three aspects.This paper is divided into six parts:First, we explain the background and significance of this study. Then propose the combination of qualitative analysis and quantitative analysis and specification and empirical research research methods to study the executives characteristics of listed companies to the quality of internal controls.Second, we review the literature of the executive characteristics, the relationship between internal controls and executive background characteristics and internal control, we found that:the upper theory of Hambrick and Mason (1984) has become mainstream of the dominant paradigm, resulting in a lot of research. However, it is researched from the corporate system and other aspects to consider with managers as a homogeneous variable, not considered the shoulder to the development of internal control, implementation and oversight responsibilities of managers of personal characteristics. This study is the quality of internal controls incomplete.Third, we analyzed theoretically the impact of background characteristics of the executives of listed companies on the quality of internal control, In this paper, the corporate governance theory, team theory and the upper echelon theory on executive background characteristics and internal control theory analysis to find out the logic of both the theoretical derivation, we put assumptions based on the previous theoretical analysis of the five assumptions:the①executive team size and internal quality control is positively correlated;②The men proportion of executive team, is negative correlated with the quality of internal control;③The average age of executive team is positively related to the quality of internal control;④Average level of education of executive team and internal quality control is positively correlated;⑤Average tenure of executive team is positively correlated to internal quality control.Fifth, according to the results of empirical research, we propose the optimization of the recommendations of the senior management team:①Appropriate increasing in team members;②Appropriate increasing in the proportion of female members of senior management team;③Executive selection process as much as possible working in the high degree candidates.④Appropriate increasing in the tenure of the executive team members, maintaining the stability of the executive team.Finally, put forward the innovation and contribution of this paper. In this paper, there are certain defects in the sample selection and variable measurement. The measure of internal control quality is in the discussion stage by domestic scholars. That this paper use the disclosure of management’s internal control self-assessment reports of listed companies to measure the quality of internal control has certain inadequacies.