Internal Control,Accounting Information Quality And Investment Efficiency

A series of studies suggest that inefficient investment is common among listed companies in China in recent years(Zhang Chun and Lv Wei,2009;Zhou Weixian,2010).A possible immediate consequence of it is the damage of contractors' interests such as shareholders and creditors.As aggregations of contracts,the safeguard and balance of contract parties' interests has been a research focus for modern enterprises.In practice,countries have been paying close attention to corporates' internal control system arrangement.America,Japan and South Korea have introduced a series of regulatory policies on internal control successively.In 2008,the Finance Ministry of our country also issued the 'Basic Norms of Enterprise Internal control',which was regarded as the Chinese version of Sarbanes-Oxley ACT(C-SOX).Though internal control has become the focus of international concern,it remains to be investigated whether relevant measures play a desired effect in practice.In terms of theoretical research,studies concerning the effect of internal control on enterprise investment efficiency are both rare and controversial.On the other hand,continuous improvement of internal control system is bound up with accounting information quality.Does the advancement of internal control help enhance corporates'accounting information quality and investment efficiency?Is the positive influence of internal control on investment efficiency,if any,achieved via the improvement of accounting information quality?The paper focuses on these questions.The paper utilizes a sample of non-financial A-share listed companies from 2007 to 2015.With respect to variable measurement,it adopts Richardson's(2006)model to proxy for inefficient investment,measures accounting information quality using the modified Jones model,and refers to Fang Hongxing and Jin Yuna(2013),measuring internal control quality with accessible external information,to study the interrelation between the three factors and the mediating role of accruals.Besides,additional tests analyze the relationship between the three factors under different ownerships.Empirical results show that:(1)Internal control quality is significantly negatively correlated with over-investment,under-investment,and inefficient investment as a whole,suggesting that high-quality internal control can exert effective restriction on over-investment and under-investment,raising the efficiency of investment;(2)In the mediation test of accounting information quality,the under-investment subsample passes while the over-investment subsample does not The improved internal control quality can relieve the information asymmetry between internal and external stakeholders,therefore ease financing constraints and under-investment However,for investment projects,the betterment of internal control quality may not help solve the lack of information,thus over-investment is still possible.This paper empirically examines the impact of internal control quality on accounting information quality and investment efficiency,and further discusses the mediating effect of accounting information between internal control and investment efficiency.It enriches the literature regarding internal control,accounting information and investment efficiency and helps enhance the understanding of the action mechanism of internal control to investment efficiency.