A Study On The Relationship Between The Political Connections Of Senior Executives And The Effectiveness Of Internal Control In Chinese Listed Companies

Since the beginning of the 21 st century,There have been frequent cases of fraud and violation of laws and regulations in listed companies,which have seriously hit the confidence of capital market and investors.In the cases of fraud and violation of laws and regulations,wealth is not the original crime,and the failure of internal control is the root.Enron,which failed in internal control,donated more than $6 million to the British and American governments in 10 years,In the corruption case of gujing company and the case of changchun changsheng fake vaccine,its main leaders also served as government officials or NPC deputies or CPPCC members;We listed the DIB internal control index of listed companies from 2016 to 2018 in descending order and found that the most stable and high-quality internal control is China state construction corporation.During this period,the main leader of China state construction corporation served as representative of the 19 th National Congress and as alternate member of the CPC Central Committee.It can be seen that political connections of senior executives play a "soft environment" role in internal control.From the case and data analysis,we can see that political connections of senior executives work in different directions,so what are the reasons for the difference? How do different situations affect the relationship?Through reading the existing literature,this paper finds that the influence of political connections of senior executives on the effectiveness of internal control is less and the conclusions of the existing literature are inconsistent;Further through qualitative analysis,we use relevant theories to analyze the relationship between political connections of senior executives and the effectiveness of internal control.Through comparative study,the paper considers the differences between the represents committee-type political connections and the government official-type political connections on the effectiveness of internal control and the regulating effect of property right nature and marketization degree on the relationship between them;Then,this paper takes A-share listed companies in Shanghai and Shenzhen in2016-2018 as samples to conduct empirical test.The results show that:Firstly,The political connections of chairman or general manager will promote the effectiveness of internal control;Secondly,Compared with senior executives who have the government official-type political connections,the represents committee-type political connections can promote the improvement of the effectiveness of internal control more;Thirdly,Political connections of senior executives both state-owned enterprises and private enterprises will promote the effectiveness of internal control,but it is more obvious in state-owned enterprises;Fourthly,The higher the marketization degree is,the more effective the internal control will be,and the marketization degree will negatively inhibit the promotion effect of political connections of senior executives on the effectiveness of internal control.Finally,this paper puts forward corresponding policy suggestions from two dimensions and four aspects.The main body dimension is divided into enterprise and government,and the time dimension is divided into current stage and long-term perspective.