The Research On The Quality Of Internal Control Information Disclosure Of Listed Companies

Management practice proves that the management work of the enterprise begins from establishing and perfecting the internal control. So the internal control is the basis of the management for it plays an important role of guaranteeing accounting information adequacy. China had gradually deepened the understanding of internal control information disclosure of listed corporations and issued a series of laws and regulations to regulate internal control information disclosure after a series of accounting fraud events happened. Although internal control information disclosure system is in the continuous improvement status, however, it is still not effective for it exists the the phenomenon of disguising internal control deficiencies disclosure. So this paper is to study the quality of the internal control information disclosure based on the new perspective of internal control deficiencies.Firstly, it constructs a framework for the analysis of the mechanism of quality of internal control information disclosure, including internal structural analysis and exeternal functional analysis. Internal structural analysis emphasizes on the reasons of internal control deficiencies. Based on the applications of internal control, it finds the existed deficiencies, the discovery and disclosure processes and the internal control deficiencies index system. Exeternal functional analysis puts the impact of factors and market feedback into the same framework to build the formation of "Property rights (P) the Quality of internal control information disclosure (I) -Market reactions(M)" analysis framework. The quality of internal control information disclosure has been as an intermediary to link the company’s property and the market reaction.Secondly, it constitutes the analysis framework of the quality of internal control information disclosure from the perspective of internal control deficiencies. It contains the connotations and denotations of the quality of internal control information disclosure, the disclosure quality contents, the evaluation criteria, the internal motivations analysis including governance structure, corporate ownership structure, external audit, the company’s basic characteristics four basic perspectives the external economic consequences analysis including the cost of equity capital, the cost of debt capical and the firm’s value three basic perspectives.Thirdly, we check out the important influencing factors with the Shanghai stock market listed corporations 2010-2012 data in the quantitative perspective. We find that the index of the quality of internal control information disclosure has significantly positive correlations to Big4 auditing, audit committee accounting financial expertises, audit committee non-accounting financial expertises, nature of the controlling shareholders, the proportions of institutional investor ownership and firm size whereas has significantly negative correlations to the amount of board meetings and the proportions of controlling shareholders.Fourthly, we focus on whether companies who follow the related laws and regulations to improve the qualities of internal control information disclosure can obtain the future benefits from the capital market. We construct the index of the quality of internal control information disclosure from the perspective of internal control deficiencies and use the index of cost of equity capital, cost of debt capical and the firm’s value to measure the future benefits from the capital market. By using Shanghai stock market listed corporations 2010-2012 empirical evidences, we find that:The higher quality of the internal control information disclosure is, the lower cost of equity capital is; The higher quality of the internal control information disclosure is, the lower cost of debt capital is; The higher quality of the internal control information disclosure is, the higher firm’s value is.Fifthly, we put forward the policy suggestions to improve the quality of the internal control information disclosure, including optimizing corporate governance structures, optimizing the ownership structures and strengthening governmental supervisions.The main innovations of this paper are as follows:Firstly, we construct a framework for analyzing the mechanism of the quality of internal control information disclosure, which is to realize the organic linkage of the internal structural analysis and the exeternal functional analysis. Previous studies focus on the single static analysis of the quality of internal control information disclosure and the internal structural analysis is lack. This article constructs the mechanism analysis framework to combine the internal structural analysis with the exeternal functional analysis.Secondly, we study the quality of internal control information disclosure in a new perspective- the perspective of internal control deficiencies. Be different from previous studies from the perspective of internal control elements, information disclosure and internal control information disclosure content, this paper is to study the quality of internal control information disclosure based on the perspective of internal control deficiencies. It not only studies the evaluation criteria but also provides an analytical framework for stakeholders.Thirdly, we increase the study of the internal motivations and external economic consequences of the quality of internal control information disclosure by using the empirical tests. Based on the existed research, this paper adds the equity factor to discuss the internal motivations from external audit, corporate governance, stock equity characteristics and basic characteristics four elements. On the basis of analyzing the impact of the quality of internal control information disclosure on financing cost (cost of equity capital, cost of debt capital), we also have the research on the firm’s value to deepen the functional research.