An Empirical Study Of The Impact Of Internal Control And Cash Flow Fluctuation On Firm Value

It is easy for fluctuation of cash flow to bring financial risk to enterprises,which is mainly caused by insufficient funds or mismatched funds.These phenomena often lead to the difficulty of capital turnover,the decline of enterprise value,and even the bankruptcy and liquidation of enterprises.Most of the existing literature focus on the relationship between cash flow fluctuation and enterprise value,but few on how to control cash flow fluctuation to enhance enterprise value.Internal control can control economic activities through a series of control measures,and quickly find and deal with financial risks of enterprises.China has promulgated two laws and regulations,The Basic Standards of Enterprise Internal Control and The Complete Guidelines for Enterprise Internal Control,aiming to guide enterprises to establish internal control system.This paper discusses the impact of internal control on the relationship between cash flow fluctuation and firm value from the perspective of risk management,and gives empirical evidence.Using the unbalanced panel data of A-share listed companies in Shen Zhen and Shanghai Stock Exchanges from 2009 to 2017 as a sample.This paper divides the study into two stages using Baron(1986)moderating effect model.The first stage is to study the relationship between cash flow fluctuation and firm value,and the second stage is to explore internal control.The relationship between cash flow fluctuation and enterprise value.Empirical results show that there is a negative correlation between cash flow fluctuation and firm value,and internal control can moderate the negative correlation.Through the first stage of the study,we can draw the following conclusions: cash flow fluctuation can be used as a signal to convey enterprise value.Controlling cash flow fluctuation can affect enterprise value.Through the study of the second stage,we can draw the following conclusion: Internal control can adjust the negative correlation between cash flow fluctuation and enterprise value.The results of the first stage show that investors can use cash flow fluctuation as a synchronous index to analyze enterprise value,and managers should strengthen the management of cash flow to enhance enterprise value.From the results of the second stage of the study,we can get enlightenment that managers should improve the internal control system of enterprises to prevent and control cash flow risk.The existing papers only find the relationship of cash flow fluctuation and enterprise value,rather then using it.This paper intends to demonstrate that companies can adjust cash flow fluctuation through internal control to enhance enterprise value.