The Influence Of Internal Control Quality On Company Performance

In view of our capital market is not mature, the research on internal control is still in its infancy. But with a series of regulations and policies are issued and implemented, especially the promulgation and implementation of the "Basic Norms of Enterprise Internal Control" and its Supporting Guidelines, marking the establishment of the enterprise internal control in China. The regulations and policies promulgated by government put forward higher requirements for listed companies, hoping to be bound by these regulations and policies to improve the internal control quality of listed companies, and then to improve company performance of listed companies.The thesis research and study on the influence of internal control quality of listed companies to company performance from the perspective of company performance, on one hand, it can enrich research in this area, and on the other hand, it can examine the implementation and effectiveness of related policies. In addition, since these regulations and policies issued are mandatory laws and regulations, the implementation of listed companies are in a passive state, and therefore listed companies are short of initiative to implement these regulations and policies, the thesis attempt to research and study on the influence of internal control quality of listed companies to company performance, which in a hope of improving the enthusiasm and initiative of listed companies.On the basis of previous scholars’researches and studies, the thesis teases out the meaning of internal control quality and company performance, and it designs index evaluation system of company performance. Based on the analysis of theory relationship between internal control quality and company performance, the thesis proposes the hypothesis, and then the thesis sets up indicators to measure internal control quality and company performance and uses the data of listed companies to examine the hypothesis. As a result, the thesis arrivals at a conclusion that high-quality of internal control can improve company performance of listed companies. Finally, the thesis makes some policy recommendations on research findings. Therefore, the content of this thesis includes the following six parts:The first part of the thesis is the introduction. This part mostly describes the background, theoretical and practical significance, research method, research ideas and the content of the article, and then summarizes the article’s innovation and deficiencies.The second part of the thesis is domestic and foreign literature review. The part divides related literatures into three categories to collect and organize:the literatures on internal control quality, the literatures on company performance and the literatures on the relationship between internal control quality and company performance. By collecting related literatures, commenting these literatures and summarizing the developing trends of relevant literatures, and then the article discoveries research opportunities.The third part of the thesis is the theoretical analysis and proposing hypothesis. The section firstly introduces the meaning and measure method of internal control and company performance. Then the thesis proposes the hypothesis by analyzing the theoretical relationship between internal control quality and company performance on three perspectives which are principal-agent theory, asymmetric information theory and contract theory. The hypothesis is high-quality internal control can improve company performance of listed companies.The fourth part of the thesis is empirical research design. Firstly, the section introduces research objects and the source of the sample. The article intends to select2013A-share listed companies at motherboard of Shenzhen Stock Exchange as research objects, excluding those samples which are financials, ST class, ST class and listed companies missing data and anomalies. Using the across-section data, the thesis analyzes the impact on internal control quality of listed companies on company performance of listed companies. Secondly, the article designs internal control quality, company performance and control variables. Lastly, we design the testing model according to the research hypothesis.The fifth part of the thesis is hypothesis testing. The part is testing the hypothesis by using the data that is collected and organized according to the testing model. Firstly, we examine the hypothesis by using descriptive statistics what I call an initial hypothesis testing; Secondly, we aim to investigate the correlation between each variable and the existence of multicollinearity problem between the related variables through a correlation testing. Thirdly, we make a regression test to examine the research hypothesis by using specific software, and then we need to analyze the result of the regression test to verify whether the result of the regression test sets up the research hypothesis. Lastly, we select the rate of return on net assets and the rate on total assets after deducting non-recurring gains as the explained variables to study robustness of research result through a robustness testing.The last part of the thesis is the research conclusion and recommendations which is a summary of the full text. The section mainly describe the research conclusion based on the result of the regression testing, and then we will give some policy recommendations according the problems that we discover during the research process and the research conclusion that we draw from the regression result.There are two main innovations of this article. The first innovation is the measurement of the internal control quality. There is no uniform standard for the measurement of the internal control quality in the existing literatures. The thesis measures the quality of internal control in the "defects view" perspective. The thesis re-defines internal control deficiencies. Compared with the existing literatures, we take the internal control audit opinion, the disclosure of internal control deficiencies in internal control audit report, disclosure ratings and other factors into consideration. The other innovation of the article is the analysis of the theory relationship between internal control quality and company performance on three perspectives which are principal-agent theory, asymmetric information theory and contract theory. Additions, we select2013data of the listed companies for empirical analysis. Weakness of the thesis is to select only A-share listed companies in Shenzhen Stock Exchange main board, and use only2013data for empirical analysis, causing the research conclusion may not be comprehensive.