Social Trust And Internal Control

Since China promulgated the "Basic Norms for Corporate Internal Control" in 2008,the regulatory authorities have actively promoted the building of internal control of listed companies,and internal control has increasingly become a topic of common concern in China's academic and practical circles.The existing literature has improved the external system.Research on the level of internal control is still relatively small.As an informal system,social trust has been increasingly valued since the party's 18th National Congress and has been incorporated into socialist core values.Therefore,it is necessary to explore the role of social trust in internal control,so as to provide new suggestions for improving the internal control of listed companies from the perspective of promoting social trust construction.This article takes the A-share listed companies in China from 2007 to 2016 as the research object to study the role of social trust in internal control and the ways in which it works.We introduce the nature of property rights,political connections,external institutional environment,personal characteristics of the board of directors,and employee characteristics as grouping variables to study whether it will have an impact on the process of social trust.Finally,we examined the effect of social trust on corporate debt financing costs and how internal control plays an intermediary role.Research findings:Firstly,social trust can improve the quality of internal control of the company.Further,social trust improves the company's internal control quality mainly by influencing the internal environment,control activities,information,and communication in the five elements of internal control.Secondly,social trust can play a role in compensating formal institutions in areas with low levels of marketization and poor legal environment.When the degree of marketization is low,social trust can promote the quality of internal control of the company in the region.In regions with poor legal protection,social trust and internal control quality ICQ are significantly positively correlated.This effect is not significant in areas with a good legal environment.Thirdly,social trust has a different role in state-owned and non-state-owned enterprises.Social trust can have a significant positive effect on the quality of internal control of non-state-owned companies,which is not significant in state-owned enterprises.Social trust plays a major role in the promotion of internal control in companies without political connections.This role is not obvious in companies with political connections.Fourthly,regarding the "human" factor,we find that social trust can play a role in improving the quality of the company's internal control among the elderly,chaired and above-educated companies with financial or legal backgrounds..At the employee level,the relationship between social trust and the quality of internal control has no substantial difference in the overall education level of different employees.That is,social trust has a significant effect on the quality of internal control,regardless of the level of academic qualifications of employees.Fifthly,the results show that social trust has the effect of reducing corporate debt costs,and the company's internal control level plays a partial mediating role for social trust and corporate debt costs.This study has enriched the research on the role of social trust at the micro level to a certain extent,and further explored the mechanism of social trust on internal control,and the impact on corporate debt capital costs.It also supplements the research on the influencing factors of internal control and provides a new perspective for policy makers to promote the internal control of listed companies from a social perspective,which has certain practical significance.