Managerial Power, Internal Control And Inefficiency Investment

The economic crisis of 2008 has a continuous effect to China’s economy that the market appears weak at present. In order to stimulate consumption and investment, thus promoting steady and rapid economic growth, our country has carried on the decresing of central bank benchmark lending and deposit rates, investing a lot of money to the society for many times. Affected by the economic environment, there are excessive investment and inefficiency investment in many companies, cause the waste of resources and interests.Due to the existence of agent conflict and information asymmetry, the acting conflicts was triggered between with management and shareholders whose interests are mutual, which leads to problems of moral hazard and adverse selection and inefficiency investment. With the publication and implementation of the "internal control standards" and the supporting guidelines, Internal control has gradually become an important method of corporate governance, which includes internal control being used in company’s environment, internal supervision, external reporting and other aspects. Internal control has a profound impact for improving enterprise management efficiency and optimizing enterprise development. Morever, as an executor who implements internal control and make decisions for project investment, manager played a pivotal role in the company’s investment efficiency.Considering the characteristics of managerial power, this paper analyses the relationship between managerial power, internal control and inefficiency investment, with a view the effect on accounting information, operating efficiency effect of internal control. Then taking into account the unique system background of our country, this paper test the investment efficiency in state-owned and non state-owned enterprises. Finally, in consideration of implementation background of the internal control system, this paper studies on the effect of the inefficiency investment under the voluntary and mandatory disclosure stage and analyses the internal control weakness and remediation. This paper studies more deeply in the development of internal control and its economic effects.On the basis of above analysis, this paper designs empirical model choosing the listed companies in 2009-2014 as the research sample, and draws the following conclusions: (1) The greater the power of manager, the more motivation and ability to maximize the interests of the individual as the goal of non shareholders’ equity and make non efficiency investment, which state-owned enterprises over-investment more relevant, and non state-owned enterprises under-investment more relevant on the theory of agency theory and asymmetric information theory; (2) High quality internal control will help to optimize the quality of financial reporting, reduce information asymmetry, design and executive supervision mechanism, inhibit the non efficiency investment behavior of manager; (3) The internal control and managerial power have the mutual restriction and balance mechanism to influence on the investment efficiency synthetically.In summary, the research of this paper enriches the related theory of optimizing the investment efficiency. At the same time it is valuable to explore the internal control to ease the agency conflict and inhibit the information asymmetry which enriches the economic consequences of internal control. The research results of this paper provides a theoretical basis and reference for optimizing policy formulation and implementation by regulators, improving corporate governance efficiency by management, easing the agency conflict by shareholders, and promoting sustainable development of the company.