Effects Of Internal Control Information Disclosure On Financing Constraints

The summer of2002, America Congress passed the "Sarbanes act". This act has awide and profound impaction on the internal control. The bill would require mandatorydisclosure of self evaluation report and audit report of internal control information, whichbrings big disclosure cost to the listing Corporation. The bill dispute mainly concentratedin the following the bill’s cost, and the trade-off between the benefits and the cost.From2011, the disclosure of internal control information is in the transition periodfrom voluntary disclosure to the mandatory disclosure stage in china. Considering theAmerica situation, whether internal control information disclosure can reduce the cost ofcapital is an important index to judge the executive effect of the Sarbanes act. In China,since2010April, the Ministry of Finance and other five ministries jointly issued the"guidelines of enterprise internal control", and since January1,2011in the domestic listedcompany shall, from now on, our country’s internal control information disclosure in thetransitional stage from voluntary disclosure to mandatory disclosure stage. On this basis,whether the disclosure of internal control information can reduce the investment’s expectedrisk of the investment entities, whether the disclosure of internal control information canrelieve financing constraints is an important topic, which is undoubtedly of greattheoretical and practical significance. At the same time, to understand the relation betweenthe internal control information disclosure and financial constraints, but also on how toenter the internal control information disclosure compulsory stage work to improve theinternal control information disclosure further also have important guiding significance.This paper is based on extensive reading scholar literature, using the theoreticalanalysis and the empirical analysis. Theoretical analysis is mainly through sorting out thebasic theory, analysis of mechanism analysis on the effect of information disclosure ofinternal control of financing constraints. Empirical analysis use the data of2011-2012,according to Almeida, Campello and Weisbach （2004）’s basic model, using SPSSanalysis tools, through descriptive statistics, correlation analysis, and regression analysis ofthe relation between information disclosure of internal control verification and enterprisefinancing constraints; and through further packet inspection verify the difference analysisof the relation between information disclosure of internal control under the background ofdifferent shareholders with financing constraints. At the same time, this paper used the study of Dhaliwal（2011）, the relation between the information disclosure of enterpriseinternal control and the equity refinancing opportunities and amount of financing of nextyear.This paper reached the following conclusions: first, the relation between the internalcontrol information disclosure and financial constraints are analyzed. Study found thatinternal control information disclosure level is higher, it can more reduce the enterprises inthe investment process for internal funds over reliance, for the final performance of thecash flow sensitivity is more reduced, the financing constraints faced by enterprises obtaina certain alleviating. Second, according to the nature of equity to the Sample Firms for thestate-owned and non-state-owned, then the two Sample Firms data are respectively used inthe regression analysis. Results show that, compared with the state-owned listingCorporation, internal control information disclosure of non state owned listing Corporation,relieving the financing constraints appear to be more prominent role. Third, in therobustness considerations, study the relation between enterprise internal controlinformation disclosure and the next year the equity refinancing opportunities or financingamount showed significant positive correlation, the relation of internal control informationdisclosure and stock refinancing opportunities and the amount of financing, furtherproves the conclusion of this paper. At the same time, the paper also found some problems:the disclosure of the existence of some problems of internal control in China, such as thedisclosure of the report format and the name is not uniform; second, China’s state-ownedenterprises in the process of production and operation, the government gives the relatedprotection, to some extent affect the fair competition. In view of the existing problems, thepaper puts forward relevant policy suggestions.