Research On The Influence Mechanism Of Internal Control On Firm Performance

Enterprise risk happened in the process of operation is often accompanied by the decline in the business performance,which lead to the company fail to reap the benefits and faced debt crisis,and even forcing firms to go bankruptcy liquidation.While firms maximize the common interests of stakeholders and make all kinds of development strategy,they also need to prevent the risks that arise from poor risk management in the process of development such as usurp assets,the financial distress,the lawsuits,insufficient market demand.Internal control is the necessary link in the comprehensive risk management of enterprises,and a series of internal control procedures are mainly concerned with the recognition and management of risks in the course of business operation.To some degree,the strengthening of internal control can reduce the operational risk and financial risk and to an acceptable low level,the decrease of risk can promote the enterprise to realize its development goal,to better achieve the development objectives and ultimately maximum owner equity.However,because there are great differences in the quality of internal control,risk level and performance level between state-owned and non-state-owned enterprises,the functional routes of internal control to performance may differ,which provides a pointcut for next research direction of this paper.In this paper,there are three key parts.Firstly,using the data from 998 Chinese A-share listed companies in 2016 establish a internal control evaluation index system,the development of internal control both state-owned enterprises and non-state-owned enterprises are evaluated.Secondly,Using a panel data set of 673 firms form 2001 to2016 and using the PVAR model to analyze the influence mechanism of internal control on risk and performance both SOEs and non-SOEs through impulse response graph.Thirdly,analyze the impact of internal control on enterprise risk and performance both SOEs and non-SOEs by using the structural equation model.In this paper,some conclusions are summarized as follows:(1)The quality of internal control decrease the risk level and increase the performance for SOEs and non-SOEs;(2)The quality of internal control have the stronger direct effect on performance,and the poor risk level have no prominent influence on performance for SOEs;(3)For non-SOEs,the effect of internal control on risk level is more obvious,and the poor risk level obviously decrease firm performance;(4)According to the overall effect of internal control on corporateperformance,the internal control have stronger effect on performance for state-owned enterprises.Firstly,one of the innovations of this paper is the research content.The study of internal control is further deepened and the influence mechanism of internal control on risk and performance are analysed.Secondly,the research angle of view,the internal control situation and existing differences between SOEs and non-SOEs are researched.Thirdly,from the perspective of research methods,the panel-VAR model and the structural equation model are applied in comprehensive description of internal control quality and its development for listed companies.Finally,some specific measures are proposed on this basis.