A Study On The Relationship Among The Internal Control,On-duty Consumption And The Business Performance Of Listed Companies

Continuously decreasing macro economy data shows that Chinese economy has become the second largest economic entity in the world after rapid development of over thirty years. At present, it is faced with the choke point and the Chinese economy has presented a continuous fatigued status. Therefore, international press circles and economic circles start turning their attention to whether China can avoid situation of "hard landing" and "middle-income trap" of economy and this is generally known as decline status. Many phenomena show that there are serious problems, prominent inner contradiction as well as a certain fragility of Chinese market economy and there are obvious problems in three main aspects in rapid development of Chinese economy such as export, investment and consumption. It can be seen that in development process of China, the cell of Chinese economy-enterprises have relatively serious operation and development problems which are mainly reflected in:there are many stiff and strong zombie enterprises among Chinese enterprises. Main characteristics of zombie enterprises are that they are short of development vitality and are on the verge of bankruptcy because of insolvency and they are supported by financial support of lenders or government to avoid bankruptcy. Zombie enterprises mainly refer to large-scale state-owned enterprises. Because they involve all aspects of local government such as economy, politics, society and development and have butterfly effect, local government is compelled to continue blood transfusion to survive. As a consequence, zombie enterprises not only encumber industrial and economic structure reform but also occupy economic resources of government economic development, thus delaying and hindering promotion of economic system reform and development of market economy. COSO Committee of America put forward Internal Control-Integrated Framework in 1992 and internal control has become focus of attention in enterprises development process. It can be seen from elaborate analysis of zombie enterprises that zombie enterprises give rise to substantially increasing losses due to fault in self operating management caused by lack of favorable internal control. According to relevant investigations, in state-owned zombie enterprises, consumption of leaders by taking advantages of their positions is far more than their wage. Enterprise managers often spend plenty of public funds for self enjoyment in working period such as buying cars, dining and wining, purchasing house and so on. Furthermore, some managers depend on enterprises to bear gambling expenditures. In enterprises, consumption by taking advantages of positions has become a common corruption problem.It is thought in this paper that apart from above-mentioned factors, the primary cause of losses in state-owned zombie enterprises is on-duty consumption of state-owned enterprise managers. On-duty consumption has become the hotbed of enterprise corruption which not only seriously wastes enterprises' management resources but also gradually become black hole for potential corruption of managers. Managers of state-owned enterprises have squandered a large amount of state and collective funds in name of "on-duty consumption" and some funds have been transformed into extra income outside of personal salary of managers and on-duty consumption opens a convenient door for abuse of power for personal gain. Normal on-duty consumption produced during the work of executives in the enterprise belongs to nonproductive expenditure of enterprise. Normal on-duty consumption is reasonable and conforms to legal regulation. However, in fact, some executives take on-duty consumption as "banner". Gain illegally "tiger skin" special rights on personal necessities of life. Casually enjoy luxury consumption. It is a typical "corruption that is not put into pockets".Academic world has made many researches about on-duty consumption. Of course, based on practical observation and logical analysis, inner control of enterprise as important code and specification to restrict business activities of enterprises, shall restrict self-interest of executives, especially on-duty consumption. But from some literatures, there are few researches on relationship between inner control of enterprise and on-duty consumption. That provides space for us to research on-duty consumption problem from inner control of enterprises.Based on data concerning A share in Shanghai and Shenzhen of listed companies from 2010 to 2014, there are 8275 samples observations (total disposal data is more than 100000) in this paper and theoretical analysis and research is carried out be centering on restriction problem of internal control of on-duty consumption in listed companies and according to the idea of "internal control-on-duty consumption-business performance":firstly, reorganize literature and conclude and collect relevant data, reorganize internal control and reform of listed companies in capital market of our country and reestablish relationship between internal control, on-duty consumption and business performance of listed companies; secondly, establish restriction mechanism of internal control on on-duty consumption based on systematic view and carry out measurement and assessment based on this so as to lay theoretical foundation for proposal of relevant policies and suggestions; thirdly, analyze influencing mechanism of internal control of listed companies on on-duty consumption of executives so as to provide guarantee for vital interests of investors and promote further improvement of internal control mechanism. At the same time, it is required to analyze specific role of internal control in management and control system of the company and put forward targeted suggestions and main measures.Research methods of this paper include qualitative and quantitative research methods:Firstly, this research is based on qualitative analysis method of literature research. In this research, mainly based on normative analysis (namely, literature analysis method), collect and reorganize related domestic and foreign cases about influence of inner control of enterprise to on-duty consumption. Aimed at literature, carry out qualitative analysis to promote theoretical research. Finally, come up with main research conclusion combined with practical cases.Secondly, this research is based on method of quantitative analysis. Carry out logical deduction aimed at relationship between of inner control of enterprise and on-duty consumption after completing theoretical derivation. Then, put forward specific hypothesis. Establish positivism model of relationship of inner control of enterprise, on-duty consumption and business performance. Carry out conclusion and quantitative analysis of data obtained. The purpose is to verify inner control of enterprise and further influences research hypothesis of enterprise business by mediating effect of on-duty consumption of executives. Check inner control of enterprise by the restriction function of on-duty consumption to improve business performance.It is found out in the analysis of practical cases that overall quality of inner control of enterprise has obvious restriction function. At the same time, basic activities of inner control of enterprises:report control activity, compliance control activity and safety control activity all suppressed on-duty consumption. This paper further finds out that on-duty consumption plays an important role in mediating effects between inner control of listed enterprise and business performance. Better inner control of enterprise can restrict selfishness action of executives in listed companies and efficiently control on-duty consumption of executives in listed companies. Promote business performance of enterprises. Restriction function of inner control of enterprises to on-duty consumption is different in different cases. This paper provides theoretical basis for restriction function of inner control of listed enterprises to on-duty consumption.Contribution of this paper lies in the following three points:Firstly, internal control is taken as entry point of research in this paper for the first time and the constraint and control mechanism of internal control on on-duty consumption is discussed. Based on in-depth research of influencing mechanism of overall quality of internal control on on-duty consumption, internal control activities are classified into three basic activities such as compliance, report and assets safety from aspect of control activities. Thus, in-depth analysis is carried out on on-duty consumption and business performance of three basic activities of internal control, which is rarely seen in existing researches. From aspect of interdisciplinary research such as consuming behaviors, business management, internal control, economics, corporate finance and so on, this research further enriches and expands that internal control can make up and reduce the agency cost generated by behaviors of resource owners. Corresponding control methods and control key points are taken for effective management of on-duty consumption of middle and executives in operating management activities of listed companies.Secondly, internal control is taken as entry point in this paper and the econometric model of internal control's constraints on on-duty consumption is discussed and established in this paper. America and the other western developed countries have impeccable corporate governance system and they don't have particularly prominent problem in on-duty consumption; however, China is in market economy transition process at present and the owner's absence and internal personnel control in big shareholder and state-owned listed companies are ubiquitous in capital market, thus on-duty consumption in Chinese listed companies shows prominent characteristics of hidden corruption. Different from existing research about restriction mechanism of management's power on on-duty consumption, this research further enriches and improves the research on on-duty consumption of executives in listed company.Thirdly, as for listed companies in China, it can be found from further research in this paper that the internal control influences business performance through on-duty consumption, which means internal control can promote business performance by restraining the channel of on-duty consumption. With the progress promotion of internal control in restricting on-duty consumption, the Company's final business performance has constant positive progress, thus providing relatively firm theoretical foundation for listed companies in China by improving internal control and restricting on-duty consumption of executives.Even though the endogeneity problem brought by reciprocal causation between significant variables is analyzed in this paper, the model may still have the endogeneity problem caused by missing variables.In view of restrictions of data availability, the problem of possible missing variables fails to be preferably solved. As for this problem, more variables with possible influences will be integrated in future researches for more profound and comprehensive discussion. In future research, it is allowed to integrate regional difference, cultural difference and other situational factors or other factors into future research model so as to find out influences of internal control on on-duty consumption under the influence of other factors, which can more extensively provide theoretical guidance for management practice of the Company.