As an important indicator of earnings quality,earnings persistence can reflect the allocation efficiency and effect of resources in the capital market.The frequent exposure of financial fraud cases of listed companies such as Qiongminyuan,Yinguangxia,Ziguang Guhan,Wanfushengke,etc.,has caused huge losses to investors.The root cause is that the internal control system of enterprises has failed,and this kind of artificial the manipulated accounting surplus lacks continuity.Therefore,based on the promulgation and implementation of China’s internal control policy,it is of great theoretical and practical significance to study the impact of internal control deficiencies on earnings sustainability.Firstly,this paper sorts out the related literatures on the relationship between earnings persistence,internal control defects and repair,internal control defects and repair and earnings persistence,and summarizes accounting target theory,principal-agent theory,signal transmission theory and information asymmetry theory.Secondly,according to the basic theory,the theoretical analysis framework of the relationship between internal control defects,defect types and repair and earnings persistence is proposed from the aspects of accrued surplus and cash surplus.On the basis of theoretical analysis,this paper selects the data of Shanghai and Shenzhen A-share listed companies from 2012 to 2017 as research samples,collects internal control evaluation reports and internal control audit reports of listed companies,and manually collects internal control defects and repair related data.The screening finally yielded 9318 sample observations.By using descriptive statistics,T-test,correlation test and multiple linear regression,the effects of internal control defects,defect types and defect repair on earnings persistence and its components were tested.The study found that compared with enterprises with sound internal control,enterprises with internal control defects have lower earnings persistence,accrued earnings persistence and cash surplus persistence are low;internal control defects are significantly negatively correlated with earnings persistence,internal control The more serious the defect,the lower the persistence of earnings,and the lower the persistence of accrued earnings and the sustainability of cash surplus.After the internal control defects are repaired,the persistence of corporate earnings and its components has been significantly improved.Based on the combination of theoretical analysis and empirical research,this paper puts forward relevant policy suggestions from the two levels of listedcompanies and regulatory departments to improve the internal control of enterprises,enhance the effectiveness of internal control,and promote the sustainable development of enterprises.The conclusion of this study provides a new perspective for the regulatory authorities and investors to evaluate the degree of realization of internal control objectives,and also provides a new way to improve the earnings sustainability of listed companies.This paper has 4figures,14 tables and 110 references. |