Research On The Relationship Between Internal Control Defects And Inefficiency Investment Of Company

Internal control exists in the entire company's operating activities,and it is an important guarantee for companies to avoid risks and achieve business objectives.With the continuous improvement of China's internal control rules and regulations,the companies pay more and more attention to the construction of internal control systems.Research on internal control has also attracted the attention of Chinese scholars.However,due to the late start of the internal control system of listed companies in China,some companies still have internal control weakness.The economic consequences of internal control flaws have achieved certain research results,but the research on the relationship of internal control and investment is relatively less.Investment is one of the three carriages that drive China's economic growth,it is crucial to the development of the country and the company.If the investment efficiency of the company is too low,it will lead to the waste of resources,and it will not be conducive to the long-term development of the company.Previous studies have shown that the company's inefficiency investment is mainly caused by information asymmetry and principal-agent issues,and internal control defects will lead to intensification of the company's problems.Therefore,this paper mainly studies the relationship between internal control defects and the company's inefficiency investment,in order to help companies mitigate inefficient investments.This article selects the data of 2012-2016 of A-share listed companies in China's Shanghai and Shenzhen stock markets as the example to conduct the empirical study.The article analyzes the relationship between internal control defects and inefficiency investment of the company.This article first describes the investment status of listed companies in China,and based on the theory of principal-agent,information asymmetry,free cash flow and others,it is found that the inefficiency investment phenomenon is common in China's listed companies,and the internal control defect is one of the main reasons that lead to this phenomenon.As the severity of internal control defects increases,the company's level of inefficient investment will also increase.When classify the internal control flaws according to the causes,it is found that the design defects are positively affecting inefficiency investments,but the results are not significant;operational defects are significantly positively correlated with non-efficiency investments.In addition,this paper also studies the relationship between the five elements' defects of internal control and inefficient investment.Although the relationship between some factors and inefficiency investment is not significant,but overall they are significantly positively related.Therefore,the listed companies in China should actively improve the effectiveness of the internal control system,in order to improve the company's investment efficiency.