Research On The Motivation, Economic Consequences And Prediction Of Illegal Internal Control Information Disclosure Behavior

Internal control information disclosure has being the effective means to regulatethe behavior of listed companies, protect the interests of the investors and improve theallocation efficiency of securities market with the issue of SOX act and theestablishment and implementation of internal control standard system step by step inour country. It is the legal requirements for listed companies and important basis forinvestors to make decisions to disclose internal control information truly, reliably andfully. Internal control information is valuable for investors to make decision. Thisprompts enterprise managements to have the opportunism motivation to hide badnews under the trade-offs. Especially in China, legal binding is lack and internalcorporate governance mechanism is weak at present. Managers have the power toaffect corporate governance and decision-making to seek rent through power, whichmakes it possible for managers to obtain private benefits by manipulating informationdisclosure of internal control using managerial power. This results in the lack ofsubstantial contents in internal control information disclosure. So, motivatedselectivity opportunism irregularities exist in internal control information disclosure.Based on this, it dwells upon the motivation, economic consequences of the motivatedselectivity opportunism irregularities in internal control information disclosure. And italso tries to develop a general model to predict the illegal internal control informationdisclosure behavior based on the perspective of finance, market and governance.Based on a comprehensive overview of research at home and abroad, it integrallyuses the latest research results of principal-agent theory, asymmetric informationtheory, signaling theory and rent-seeking theory to analyze the motivation selectivityopportunistic illegal behavior in internal control information disclosure.This paperanalyzes the internal control self-assessment report of the listed companies inShenzhen stock market in2008-2012. Specifically, we analyze the current situation ofinternal control information disclosure.We think it does exist the tendency ofmotivated selectivity in internal control information disclosure. And the reliability ofinternal control self assessment report in listed companies is questionable. In view ofthe management’s important role in the process of establishment, improvement,implementation, evaluation and information disclosure in internal control, it dwellsupon the motivation, economic consequences of the motivated selectivityopportunism irregularities in internal control information disclosure from the perspective of managerial power. And it also tries to develop a general model topredict the illegal internal control information disclosure behavior. Based on thefinancial restated companies during2008-2012in Shenzhen trading market, wedetermine the listed companies with internal control defects and analyze whether theexisting internal control defects are disclosed. It examines the motivation of motivatedselectivity opportunism irregularities in internal control information disclosure fromthe perspective of managerial power. It also analyze the economic consequences ofhiding the existing internal control defects from the two aspects of stock marketreaction and the execution mechanism of internal control specification. And it alsotries to develop a general model to predict the illegal internal control informationdisclosure behavior based on the perspective of finance, market and governance toprovide decision basis for investors and regulators.