Research On The Influence Of Executive Power On Selective Disclosure Of Internal Control Deficiencies

The assurance of the company’s strategic aims and fiscal assets is ensured by internal regulation.China has implemented a number of legal regulations,such as the Basic Standards for Internal Control of Enterprises and the Supporting Guidelines for Internal Control of Enterprises,to bolster the oversight and control of listed companies’ internal control.These regulations necessitate that listed companies continually enhance their internal control system and honestly reveal the pertinent information of internal control.The academic and practical circles have given great consideration to the disclosure of internal control data.The capital market’s swift growth has caused a surge in the need for internal control data among its participants.Senior executives,as obligors of the disclosure of internal control information of listed companies,have a decisive part to play in the disclosure of internal control deficiencies.However,due to the opportunistic tendencies and self-interest motives of senior executives,they may not be able to restrain senior executives when the internal and external supervision is weakened,Then executives may use their power to selectively disclose the existing internal control deficiencies and conceal the "bad news" of listed companies.This behavior of concealing "bad news" will undoubtedly affect the decisions of external stakeholders,and even damage their interests.The importance of examining the effect of executive authority on the selective disclosure of internal control deficiencies to external stakeholders is thus immense.This paper,taking into account executive power,audit quality,audit committee characteristics,and selective disclosure of internal control deficiencies,draws upon existing literature for reference,induction,and summary.It then proposes research hypotheses based on information asymmetry theory,principal-agent theory,signaling theory,and reputation theory,combining empirical and normative research methods.This paper investigates the influence of executive authority on the selective disclosure of internal control deficiencies and the part of internal control audit quality and audit committee features in the correlation between the two through descriptive statistics,correlation analysis,Logit regression analysis,and other techniques,utilizing the pertinent data of listed companies on the Shanghai and Shenzhen A-shares main board from 2012 to2020 as the research object.The study revealed that companies with more executive authority are more likely to selectively disclose internal control deficiencies;however,the quality of the audit can impede the beneficial effect of executive power on the selective disclosure of internal control deficiencies;and the independence and professionalism of the audit committee can impede the beneficial effect of executive power on the selective disclosure of internal control deficiencies.Research has revealed a significant positive correlation between executive owner power,structural power,and personal ability power and the selective disclosure of internal control deficiencies.This disclosure will significantly raise the long-term debt and equity costs of listed companies,yet reduce the regulatory and litigation risks.This study stands out for its innovation: while there is a limited amount of domestic research on the correlation between executive power and the selective disclosure of internal control deficiencies,there are few studies on the effect of various aspects of executive power on the selective disclosure of internal control deficiencies.This paper divides executive power into owner,structural,and personal ability power,and examines its effect on the selective disclosure of internal control deficiencies.Additionally,it investigates the influence of internal and external supervision on the selective disclosure of executive power and internal control deficiencies,taking into account the quality of internal control audit and the chara.The correlation between the characteristics of the audit committee and the selective disclosure of internal control deficiencies furnishes empirical evidence,thereby enriching the pertinent research on the quality of internal control audit and the characteristics of the audit committee,as well as providing theoretical and practical circles with an insight into executive power and internal control audit quality.