Research On The Relationship Between The Internal Control Effectiveness And Company Performance

The rapid development of society economy and accelerating capital liquidity give our country a good chance to develop our country’s capital market. Because of this background,as the most important body of every country’s capital market, the listing companies attract most scholars’ attention,which drive them to committed to research how to promote company performance. On the basis of equity structure perspective, researching on the relationship of internal control effectiveness and company performance receives more attention. Formulating reasonable equity structure can help listing companies avoid risks and convey real companies’ profit distribution situation to the outside. Equity structure is the foundation of the company governance structure, and some experts use ownership concentration and equity balance degreee to measure it. As one of the most important tools of measuring the company governance environment, internal control provides a reasonable guarantee for listing companies,which can help them achieve operational goals favorably.But some listing companies scandals, such as Enron, the Shanghai medical door and other events, which have revealed a common malpractice: internal control hasn’t been carried out effectively by companies. Even in the second half of 2015, our country happens a series of serious incidents:stock market crash, insider control and so on, which makes our country’s economy suffer huge loss and gives us a wise belief: we must value internal control’s research and practice now. In this new situation, how the shareholders’ shareholding ratios and internal control effectiveness practice to effect on company performance is a hot spot of research. In the 21 st century, after a long development period,small and medium-sized plates develop rapidly, which is showing vigorous vitality. Among them, as we all kown, the small plates are important objects in our capital market gradation.Our country’s innovation development strategy is also providing a good outlook to improve medium-sized plate.Therefore,we select small and medium-sized plates as research sample,which is a typical case.This paper selects five years’ small and medium-sized plate listing companies’ data and probe the relationship of internal control effectiveness and company performance fromdistinct perspective of equity structure.We search some literatures, magazines and periodicals, and sort out 4 relevant theories.Then we bring forward 3 hypothesis. Secondly,according to this paper’s theme, we find out some variables and formulate 3 research models.Then we download some datas from Guo Taian database and impress on Excel and SPSS software to arrange these datas. After excluding outliers, we acquire 3000 observations. Lastly, we we analyze the empirical results.The empirical results are the same as hypothesis.That are the following results. The most effective internal control, the better company performance;compared to the company of higher ownership concentration degree, the company with lower degree of ownership concentration’s internal control effectiveness has a greater positive effect on company performance;compared to the company of lower degree of equity balance, the company with higher degree of equity balance’s internal control effectiveness of the company has a greater positive effect on company performance.We conduct a robust test and the results are identical of the second hypothesis. Above all,we bring forward related advices:strengthen the equity balance and form the checks and balances mechanism of the largest shareholders; improve the internal control system and improve the internal control efficiency. At last,we set forth this paper’s problems and prospects.