Research On The Interaction Between Corporate Governance And Internal Control

Corporate governance and internal control are two of the most important topics in the theoretical fields and practical fields. Currently, There are mainly two kinds of views on the relations between corporate governance and internal control: one of that is "the system-environment theory"; another states that the relationship should be interactive. This thesis approves the latter one.The firm is a nexus of contracts. As two kinds of systematic arrangements inside the contractual entity, the foundation of the interactivity between corporate governance and internal control mainly embodies in four aspects: consistency of the originating, the same carrier, the same theories foundation and crossed contents. As the effective installing of residual control rights is not only the key to comprehend the governance structure, but also the key to implement the internal control, it is certainly the logic point of departure of the interaction. The governance mechanisms' unceasing completeness can externalize the internal control, make the balance of the supply and demand of internal control and improve the internal audit restraint mechanisms. On the other hand, the unceasing perfection of internal control mechanisms can strengthen the completeness of the contracts, improve the external governance mechanisms and make the internal incentive and restraint mechanisms more effective. Their positive interaction can bring two results directly, the exaltation of system efficiency and enterprise' core competencies.During the transmission economy, excessively high ratio of the state-owned share leads to the insider control problems unavoidable, this is the main reason for the invalid balance of the interaction system. Another reason is the valid accounting information demanders' depletion from the outside. This thesis put forward several suggestions to control the insider control problems, which is the key to realize the positive interaction, including completing the regime defect of stock market, enhancing the management of investors' relationship, and completing the executives' salary system.