The Influence Of Internal Control To Bank Credit Decision

Financial institutions play a significant role, which is also the most important financing channels. Owing to the imperfect development of our security market, debt financing has already been the priority for the companies. What is more, after the financial crisis in2008, the stock market has been in a downturn, which results in the decrease in the amount of equity financing, as a consequence, the bank is especially in the leading role. The bank should commit to improve the validity of the credit decisions, so as to reduce the default risk which comes from the companies. The bank usually makes the loan decision analysis based on the accounting information, but a series of accounting frauds in the public companies make the accounting information appear to be unreal and reduces its effectiveness in the debt contracts. While internal control is regarded as the internal activities mechanism in the company, so internal control will influence a company’s information risk, operate risk and law risk, which will translate into the bank’s credit risk with bank loan. So, with the emphasis on the internal control construction and the improvement of the level of internal control, whether internal control will influence bank’s capability to recognize the risk in the loan company, then affect its bank decision-making or not?Existing researches about the consequences of internal control mainly concentrate on the audit pricing, earning management, corporate performance and information disclosure and some thing like that, but less on the bank decision. This article will study its effect on the bank decision-making from the perspective of internal control. Firstly the paper summarizes and analyzes the existing literature related with internal control and credit decision making by using the method of literature analysis. Secondly it demonstrates the mechanism between the internal control and the bank decision-making through the normative research. Then it mainly focuses on the relationship between the internal control and bank decision by using the empirical research including statistical analysis and regression analysis, in which we use2011-2012A-share listed companies as our samples. We find that internal control has an effect on the bank decision to some extent, which means that the higher level of internal control, the more bank loan proportion and the longer length of maturity companies will get. At last, it summarizes the research conclusions based on the empirical research and comes forward some suggestions from the listed company, bank and regulators. Therefore, the article is as follows:The first part of introduction, this chapter mainly introduces the research background, research meanings, research ideas and research content, research innovation and deficiency.The second part of the literature review, this chapter is proceeding from two paths:one is about credit decision, which demonstrates the factors that influence bank credit decisions; another is about internal control, mainly about the consequences of internal control. Then make some brief summary.The third part of the theoretical analysis, this chapter describes something about bank credit decision and something related firstly, then discuss some contents about internal control and internal control information, at last, analyzes internal control s influence on the bank credit decisions from the point of theory.The forth part of the research design, this chapter is mainly about the model design, some definitions and demonstrations about the research variables and the selection of the study sample, which will make a foundation for the next chapter.The fifth part of the empirical study, the chapter mainly uses SPSS analytical software to do descriptive statistics, correlation analysis and regression analysis. What is more, this chapter also makes some explanations and analysis about the study results.The sixth part of the study consequences and suggestions, this chapter summarizes the research conclusion and brings forward some suggestions from the listed company, bank and regulators.