| Currently, business failures occur from time to time due to the invalidation of internal control. Not only problems occurred in internal control will bring great disaster to company itself but also lead the instability to social economy. Therefore, no matter at home or abroad, there are a series of regulatory frameworks on internal control. Effectiveness of internal control can influence economy in two ways:company performance and information disclosure. This article will give an in-depth exploration on the correlationbetweentheeffectivenessofinternalcontrolandcompanyperformance,whichaims toattracta high attention to internal control in society, and then encourage companies to build a healthy and effective internal control, which will realize the stable development of themselves.This article takes Shenzhen GEM companies as research sample, and takes return on equity as an index to measure the performance of enterprise. This article examines the effectiveness of internal control through five dimensions, including the existence of any illegal punishment of company, types of enterprise financial statement audit report efficiency of enterprise’s operation, security of enterprise asset and the implement of enterprise strategy. Then the author uses correlation analysis and linear regression analysis to examine the impact of internal control effectiveness on company performance. This research controls other factors that may affect business performance, such as enterprise scale, asset-liability ratio,etc., which will improve the accuracy of the research. Also, the author replaces ROE with net interest rate of the total assets to measure the robustness of company performance. And the final results of this research are basically in agreement with the research hypothesis.This paper suggests that the effectiveness of internal control and enterprise operating performance are positively correlated.Conclusion of this article: in the case of other variables being consistent, the higher the enterprise’s internal control effectiveness is, the better the operating performance is. In other words, the effectiveness of internal control and enterprise operating performance are positively correlated. Specifically, the existence of illegal punishment and the type of opinions of the audit report is negatively related to the enterprise performance. They both can be regarded as the representatives of internal control’s defects. If internal control effectiveness is poor, then the enterprise performance will be worse. And the efficiency of operation, asset security, the implementing degree of the development strategy have a positive effect on business performance.Finally, based on the conclusion above, from the angles of country and company, this paper puts forward a series of measures and suggestions on improving the effectiveness of internal control, hoping to enhance the design and implementation of the internal control system, to improve enterprise performance, and ultimately to promote the steady, healthy,sustainable development of economy in our country. |
