The Influence Of Internal Control On The Relationship Between Investor Sentiment And Corporate Investment Efficiency

In the face of the concept of development under the new situation in China,how to maximize the reduction of inefficient investment behavior and improve the efficiency of enterprise investment is a hot issue in the current research field.The immature localization of domestic capital market provides a "hotbed" for irrational investor sentiment,which will bring about inefficient investment problems for enterprises.Although the existing literature has done a lot of research on the relationship between investor sentiment and enterprise investment efficiency,few studies have considered whether the existence of internal control has an impact on the relationship between them.This paper introduces the third variable-Internal Control for the first time,and explores the effect of internal control on the relationship between them by combining qualitative and quantitative methods.Through this study,we enrich the research dimension of the relationship between investor sentiment and enterprise investment efficiency in theory.From a practical point of view,it provides a comprehensive and relatively good path guidance for those enterprises that are committed to reducing the impact of investor sentiment on investment efficiency from a new perspective-internal control.Based on the theory of behavioral company finance,investment theory and internal control theory,this paper combines theory and empirical research to study how internal control affects the relationship between investor sentiment and corporate investment efficiency and how it works.Firstly,this paper defines the concepts of internal control,investor sentiment and enterprise investment efficiency.Secondly,it reviews the relevant literature at home and abroad and introduces the basic theory.Then it divides internal control into five elements: internal environment,risk assessment,control activities,information and communication,and internal supervision.Through theoretical and empirical research on the impact of each factor on the relationship between investor sentiment and enterprise investment efficiency,and further study on the comprehensive impact of internal control on the relationship between investor sentiment and enterprise investment efficiency.Finally draw conclusions,put forward policy recommendations and pointed out the limitations and prospects of this paper.Through theoretical and empirical analysis,this paper draws the following conclusions: Firstly,investor sentiment has a positive correlation on overinvestment and a negative correlation on underinvestment.Second,good internal environment,reasonable risk assessment,standardized control activities,effective information and communication,and strong internal supervision can play an effective role in different channels,which weakens the impact of investor sentiment on investment efficiency.Third,high-quality internal control can play a much powerful role of checks and balances,supervision and incentives under the synergy of the five elements,which is conducive to significantly weakening the negative impact of investor sentiment on the investment efficiency of enterprises.Based on the conclusions,we put forward the following suggestions from the perspective of investors,regulators and companies:(1)Individual investors should improve their professional quality;institutional investors should optimize asset allocation management.(2)Regulators should strengthen propaganda and education,guide investors to rationalize their structure,and strengthen external checks and balances.(3)The company should optimize the construction of internal environment,strengthen the awareness of risk assessment and effectively practice control activities,attach importance to information and communication and improve internal supervision and management,and ultimately build a sound internal control system.