| Internal control is the basic institutional environment of enterprises, since the birth of the concept of internal control traction; internal control plays an important role in the operation of the company and the protection of investors. For a long time, financial scandal of listed companies’ come up one after another, seriously affecting people’s confidence in the capital markets. Disclosure of internal control information is a very important aspect of internal control which can help improving the construction and improvement of internal control system. Debt contract is a legally binding contract between the debtor and the creditor. Because the creditor does not directly operate the enterprise management, information asymmetry leads to adverse selection and moral hazard which does harm to creditors. In recent years, many scholars researched the relationship between accounting information and debt covenants, studies have shown that the quality of accounting information has an important impact on debt covenants. However, high-quality accounting information is based on the high quality of internal control, internal control system disclosure system of internal control can provide a strong guarantee for the quality of accounting information for completeness and accuracy.Therefore, from the perspective of internal controls, this paper researches the influence of information disclosure quality of internal control over the debt covenants.To better understand the impact of the information disclosure quality of internal control on debt covenants, the paper is divided into five sections to study.The first chapter is the introduction. This part includes the research background, purpose and significance of this paper, ideas and methods of the paper, the study’s main logical structure and results of research and innovation.The second chapter is literature review. From domestic and foreign dimensions, there are five parts of the information disclosure of internal control, debt covenants related research. Firstly, this part studies the concept of information disclosure of internal control, information disclosure quality of internal control and economic consequences. Secondly, the contract defines the concept of debt, and debt covenants conflict.Thirdly, this part is about relationship of internal control disclosure of information, the quality of accounting information and debt covenants. Besides, the relationship between the institutional environment and debt covenants are reviewed. Finally, these content are summarized.The third chapter is the theoretical basis of this article. The first is financial goal theory, corporate financial goals is to maximize the interests of stakeholders, including creditors, internal controls and financial goals are fundamentally the same, sound internal control will help protect the interests of creditors. Asymmetric information is related to the presence of adverse selection and moral hazard so that the creditors are in a relatively inferior position, the information disclosure of internal control is to some extent alleviate the problem of asymmetric information between the creditor and the debtor.Thirdly, agency theory, specifically addressed the creditor and debtor relations agency after the signing of the contract, over-investment and lack of investment would damage the interests of the creditors, so debt covenants is needed to protect the interests of creditors. Finally, this part tells the signal transmission theory, information disclosure quality of internal control transmits signals of the high-quality, strong profitability and development capacity of the company, to facilitate the supervision of the debtor’s. Therefore information disclosure quality of internal control could help debtors get loose debt covenants.The fourth chapter is research design and empirical analysis. The first section is research hypotheses, with new lending, borrowing capital costs and debt maturity as a proxy variable of debt covenants. H1:When ceteris paribus, the higher the quality of information disclosure of internal control, the higher of new loans, the lower cost of debt capital, the longer debt maturity. Combined with China’s institutional background, we come up with the second assumption H2:the nature of state-owned enterprises will weaken the impact of the quality of internal control information disclosure on debt covenants. The second part is about study design, including sample selection process, data sources and processing, the distribution of sample points for the year and industry statistics, interpretation and control variable selection process and the definition of research is to determine the final model; Section empirical research and analysis. Include major explanatory variables and control variables descriptive statistical correlation analysis, regression analysis and robustness tests. Combination of annual and sub-sectors of the regression model, using multiple regression analysis, and other methods for testing the robustness of internal control information disclosure quality and debt covenant relationship.On this basis, further on the basis of the nature of state-owned enterprises and non-state-owned enterprises on the sub-grouping to do regression, there are differences between the different types of impact on debt covenants.then data and theoretical help the analysis of the differences.The fifth chapter is the conclusion, the deficiencies and policy recommendations. Strengthen internal controls in accordance with the conclusions presented information disclosure laws and regulations, and strengthening internal controls; establish the authority of the internal control information disclosure index, the nature of non-state-owned enterprises should be created a fair market environment.This paper comes up with the following conclusions:Firstly, The quality of internal control information disclosure has impact on debt covenants, specifically in the control of the asset-liability ratio of enterprises, growth, profitability, cash flow capabilities, company size, the level of financial markets, the proportion of fixed assets and annual and the industry variables, improvement of the quality of information disclosure of internal control can enable enterprises to obtain new borrowings and lower cost of debt capital and longer debt maturities, proving the value of the internal control information.Secondly, the state-owned nature of the information disclosure would undermine the relationship between quality of internal control and debt covenant. Pointing out that the main creditor is more sensitive to non-state-owned enterprises. The financing problem of non-state-owned enterprises is explained to some extent. The government should create a more equitable market environment, to promote the common development of different types of enterprises.The innovation points of this study lie in the following aspects:First, the results of this study make useful supplement of the corresponding empirical evidence.Whether internal control disclosure of information can improve the quality of the debt covenants and protect the interests of creditors? The present evidence is not sufficient, the further research is needed, this paper selects the Shenzhen Stock Exchange and the Shanghai Stock Exchange A shares2009-2012data, covering a wide range of samples, more representative, expanding the research ideas, making a useful supplement to the corresponding empirical evidence.Secondly, this paper combine institutional factor with internal control. Based on the quality of information disclosure of internal control and debt covenants, proving a sound internal control can effectively protect creditors, the company’s creditors will make decisions according to their own choice. Whether give businesses inside and incremental loans, whether to lower corporate cost of capital and give businesses a longer loan term. The improvement of the quality of information disclosure helps to reduce the information asymmetry between creditors and debtors, improve the supervision on company managers and restraint mechanisms, thereby protecting the interests of creditors. With the combination of the institutional background comes the hypothesis, finding that the state-owned enterprises would undermine the relationship between the internal control information disclosure and debt covenants, to some extent this conclusion explains the non-state-owned enterprises’ financing difficulties. The government needs to intensify political, economic and legal reform, to promote the development of non-state-owned enterprises and common development of enterprises of different nature. The second hypothesis put forward further evidence of the internal control of information useful for decision-making, therefore results of this study can build enterprise internal control system, improving internal control disclosure of information, providing an important basis for evaluation of policy effectiveness and other aspects. |
