The Research Of The Influence Of Internal Control Quality On The Listed Enterprise Value

In recent years, many large and well-known enterprises have been collapsed. Investigating its bottom, all are bound up with the imperfect of enterprises internal control. Since division of ownership and operation right, the two types of agency conflict caused by principal-agent relationship have restricted enterprises’ development. But the internal control can inhibit these two kinds of agency conflicts to a certain extent, to restrain the agency contradictions. So keeping in step with the international, in 2008, China promulgated the "internal control basic standards", enacted supporting guidelines in 2010, and required the company listed both at home and abroad, to implement the basic norm on January 1, 2011. All the listed companies in China have been required to carry out it on January 1, 2012. All enterprises, which have the relevant conditions in domestic companies, have to implement on January 1, 2013. Whether the implementation of internal control for enterprises by coercive force of state is really useful or not? Whether the improvement of the internal control quality promotes the enterprise value?The relevant scholars have different perspectives with this effect. Some scholars study from the point of reducing agency cost and improving the information transparency, and inhibiting of earnings management, indirectly verify the internal control quality is conductive to the promotion of enterprise value. Another part of the scholars found that high compliance costs add to enterprises burden and may inhibit the improvement of enterprise value from the perspective of the principle of capital-benefit. At the same time, the implementation effect of the Sarbanes-Oxley act in the United States in 2004 also shows that 135 companies are delisted because of the high compliance costs, and 38% of finance managers consider the bill implement reduces the enterprise value. This again raises enterprises doubts whether the internal control quality really promote the enterprise value in the enforcement background? And how to treat the basic specification is appropriate for enterprises?Based on the divergence of views on the issue in academic, the lack of direct evidences and the enforcement of our country, enterprises have to perform with high doubtfulness. So it has important theoretical importance and actual meaning to study the internal quality control’s impact on the enterprise value.This paper mainly adopts the method of empirical research to analyze the influence of the internal control quality on the enterprise value, from the angles of the principal-agent theory and cost-benefit principle. First of all, this paper conducts three aspects literature review: the first is about internal control quality and its measurement, the second is in regard to the quality of internal control and enterprise value, and the last is the relation of the quality of internal control and earnings power. And the second is explained form two aspects: the principal-agent and cost-benefit theory. We found the direct study on the relationship of the both is less, using the multiple regression method, and rarely considered the cost-effectiveness principle, in the previous research. And the further research about the action mechanism of the both is also less. Secondly, aiming at the deficiency of the previous research, this paper analyzes and studies, respectively from the perspectives of the principal-agent theory and the principle of cost benefit, the impacts of internal control quality on enterprise value. And on this basis, we further research its impacts form profitability and property right, and raise corresponding hypotheses. This part mainly uses di Po internal control index to appraise the quality of internal control, establish regression model, and use this empirical method to take large sample regression with listed enterprises’ data in 2012 and 2013. Once again we verify the relevant assumptions through using the enterprise value in winds as the substitution to carry out a robustness test.Finally, on the basis of regression analysis, we conclude that the quality of internal control promotes the improvement of the enterprise value, which verified the interpretation of principal-agent theory. The further analysis form profitability and property right character shows that the internal control promotes the enterprise value by alleviating the agency conflict and causing a good market response. But the state-owned company, with bigger agency conflict, does not appear stronger promotion. This may be related to the high cost of implementation and a mere formality of the state-owned enterprises’ internal control because of their vanity projects. And based on this, we make suggestions about reasonable using internal control to improve enterprise value. Summarize the deficiency in this study, and put forward directions for future research.This paper, using the empirical method, provides some direct evidences about the action mechanism between the internal control quality and enterprise value, and studies further form the profitability and the property right character, providing the further evidence of this influence mechanism. At the same time, this paper provides suggestions about making better use of the internal control to improve enterprise value.