Power Of The Management, Internal Control Quality And Enterprise Risk Taking

The 2008 Financial Crisis which exploded in America and expanded across the world,increased much attraction among theory fields,practice fields,and related policy departments on research about the enterprise risk taking.Much researches show that the financial crisis exploded in America is due to enterprise takes over risk which is resulted by the improper alignment of managers’ power.The centralization of managers’ power usually results into risk preference so that the enterprise over-takes much risk,and it is a tough problem to seek out the internal-external power to restrict the managements.External governance mechanism is difficult to change the power of the managements for reason that it belongs to the macroscopic scale,and at this time,internal government mechanism is of much importance.As important part of internal governance mechanism,internal control plays an indispensable role in ruling staff’s behavior of different tier and avoiding risks.In state-owned enterprises,adhering leader of the community of China,inserting the community organization into enterprise’ internal governance structure and playing the party committees’ leading role can smoothly improve the internal control and efficiently balance the power of the managements.Hence,according to different realistic backgrounds of enterprises and combing its internal control quality,this thesis is going to focus on the control of the managements’ power,and further discuss the relationships among the power of the managements,internal control quality and enterprise risk taking.The data of listed companies in Chinese A stock market from 2012 to 2016 were took as research samples,and theoretical and empirical study were combined as research methods in this thesis to study enterprise risk taking.At the very beginning,researches on the power of the management,quality of internal control,and enterprise risk taking were reviewed and commented;and then,on the basis of definition of related concepts and by combination of relevant theories like: principal-agent theory,behavioral decision theory,upper echelons theory,and the theory of close and suppression of rights,this thesis analyzed internal relations among the management power,internal control quality and enterprise risk taking,and put forward the hypothesizes;furthermore,the hypothesizes were further verified in the empirical research part by descriptive statistics,correlation statistics,and regression analysis of full samples and sub samples;at last,the research conclusion would be put forward,and based on the real background of stock market,policy and advice shall be stated.Research results show that:(1)the management power and enterprise risk taking are positively related.Enterprise’s performance volatilities more and the level of enterprise risk taking is higher because the more power of the management;(2)the management power and enterprise risk taking are negatively related.Enterprise’s internal control system is continuously perfected under the new guidance,and the internal governance of enterprise is more prominent which could decrease enterprise’s risk-taking behavior by advance evaluation,interim supervision and after tracking of enterprise’s decision behavior;(3)internal control can inhibit the positive impact of management power on enterprise risk taking and which is more intensive in state owned enterprises.Under the premise of the continuous improvement and implementation of the internal control system,internal control can form effective supervision and restriction on the managements and restrain the extreme decision-making behavior so that the risk-taking level can be stabilized.