An Empirical Research On The Relationship Between Debt Cost And Internal Control Index

The United States Enron financial fraud,the World Communications Corporation forged accounts and China's Yin Guang Xia false financial statements and other major domestic and international financial scandal broke out,so that the huge company to the end and even bankruptcy.To this end,the COSO Committee three times before and after the revision of the "internal control-integration framework",coupled with the promulgation of the Sarbanes-Oxley Act,corporate internal control construction more and more internal and external stakeholders attention.China's Ministry of Finance,the Commission,the Audit Commission,the CBRC and the five ministries of the CIRC have also formulated and promulgated the Basic Rules for Enterprise Internal Control and the Guidance on Internal Control of Enterprises.The supporting guidelines are the basic norms.China's internal control system for the formation of enterprises basically formed.The theory and practice at home and abroad show that building and improving the internal control system has become the only way for the development of enterprises.To improve the quality of internal control is not only an inexhaustible motive force for enterprises to maintain long-term development,but also promote the healthy development of social economy.The cost of debt refers to the capital use fee paid by the enterprise to the creditor's capital.If the cost of the debt is too high,the enterprise will not obtain the positive income,so it will affect the efficiency and effect of the business operation.And improving the efficiency and effectiveness of the operation as the core of internal control objectives can be achieved through the improvement and optimization of internal control system to further improve corporate profits,to ensure that the debt principal and interest will be pay back,to reduce the risk of creditors.Therefore,good internal control can reduce the risk of creditors by reducing the risk premium of creditors and further reduce the cost of corporate debt.If good quality of internal control can reduce the cost of corporate debt,then in different circumstances,this reduction impact of whether there is a difference? Therefore,this paper from the perspective of debt costs,to carry out the internal control of economic consequences of the study.In this paper,the data of Shanghai A-share listed companies in2013 are selected as the research samples.Based on the realization degree of internal control objectives,the qualitative and quantitative evaluation indexes are selected and the internal control index is used to synthesize the internal control index Quality of internal control of the company.Dependent variable,debt cost is measured by the ratio of interest expense to the average of the total debt at the beginning of the period,indicating the cost paid by the firm to use the debt capital.In this paper,we introduce the two subgroup variables of property rights and financial ecological environment to explore whether there are differences in the impact of internal control index on debt costs under different circumstances.This paper summarizes the research results of the previous scholars,and establishes the regression model to study the correlation between the debt cost and the internal control index,and uses the group regression method to explore the difference between the internal control and the debt cost under different circumstances.Finally,the robustness test is carried out from the aspects of changing the variable measurement method and considering the debt cost may have lagging effect.The result shows that the higher the internal control index,the better the quality of internal control and the lower the cost of debt.The effect of internal control on the cost of debt is not significant in non-state-owned enterprises and in poor financial environment.The supervisors should pay more attention to the quality of internal control construction,not just the internal control process;the enterprises themselves should strengthen the internal control construction,improve the quality of internal control to reduce the cost of debt;the government should reduce the state-owned enterprises Debt financing intervention,market-oriented rational allocation of debt funds to promote the state-owned enterprises to achieve healthy development;create a good financial environment for the development of enterprises to clear the external obstacles.The innovation of this paper mainly has the following two points:(1)From the perspective of the five objectives of internal control,taking into account the qualitative and quantitative indicators,using the database and manual collection and finishing the combination of indicators of data selection,detailed index can be more objective(2)the introduction of financial ecological environment variables,the enterprise's external environment to conduct a comprehensive evaluation to further study the impact of internal control index and debt costs,which is with the previous scholars in the case of the study of the company's internal control that only select the individual external environment variables to study the difference.