Environmental Uncertainty, Quality Of Internal Control And Debt Contract

The debt financing,as the external financing method of the listed company in our country,has it's own universality and importance.The debt financing is the main source of external financing for the listed company in our country.It can change the financing structure,reduce financial cost and increase profit.Also,the bankruptcy pressure from debt will motivate corporate agents to work harder to increase the value of company.However,the current situation of debt financing of listed companies in our country is that the lager proportion short-term loan,the higher cost of debt capital and credit discrimination for private enterprises,especially for small enterprises.Therefore,it is very significant and important to doing the research for the debt financing.Nowadays the development environment of company is changeable.Most enterprises are facing higher environmental uncertainty.Environmental uncertainty will easily leading to information asymmetry between banks and enterprises,timely increasing the business risk,inducing agency problems.In the end,the enterprises will facing more serious financial constraints.With information transmission and business risk as a bridge,we introduces internal control variables to the paper.Ensuring the true and complete financial information is an important goal of internal control.It is an effective guarantee of the quality of financial reports and can ease the information asymmetry between the two parties.At the same time,self-serving behaviors of the well-controlled company are limited and the problem of the agency of the company is reduced so that the risk of the enterprises will be reduced.This paper studies the impact of environmental uncertainty on debt contract from an external perspective and explores whether the introduction of internal control quality can regulate the relationship between the two.At first,this paper reviews the related literature about environmental uncertainty,internal control quality and debt contracts.We elaborated the theoretical basis of the influence of environmental uncertainty in debt contract.On the basis of theory we introduce our three major assumptions.Secondly,we introduced the regulatory effect of adding the quality control of internal control to environmental uncertainty and debt financing.Finally,on the base of nine models,we used uses the 2007-2016 data of all A shared company in China to test the hypothesis is correct or not.The empirical test is mainly divided into four parts:(1)Testing the impact of environmental uncertainty on debt contracts;(2)Testing the regulatory effect of internal control quality on the relationship between environmental uncertainty and debt contract;(3)Testing the influence of the property right of the firm on the regulatory effect of internal control under the environment uncertainty;(4)Testing the influence of the market power of enterprises on the regulatory effect of internal controls under environmental uncertainty.The results show that:(1)The more environmental uncertainty,the worse debt service got.(2)A great Internal control system of company will relieve the bad relation between environmental uncertainty and debt contract.(3)In the private and mid-sized enterprises,the function of internal control to the relation between debt financing and environment uncertainty become more significantly.(4)In the weak competitive enterprise,the function of internal control to the relation between debt financing and environment uncertainty become more significantly.