The Research On Reciprocal Relationships Between Corporate Governance Structure And Internal Control System

Corporate governance structure and internal control system are the kernels of modern company system. Favorable corporate governance and internal control are the necessary conditions to improve competition and performance of enterprises. Meanwhile they are microcosmic basis to protect inventors and other relatives, ensure modern market system to run orderly and efficiently. Corporate governance structure is the premise and basis to guarantee internal control system exerts functions. Internal control is on the ground of internal management and surveillance in corporate governance. To a great degree, whether the corporate governance can play real role depends on the constructions of internal control. Because of the consanguineous relationships between corporate governance structure and internal control system, depart from corporate governance environment to research internal control won't produce ultimately transforming significance. It is necessary to conduct a research on their reciprocal relationships by combining corporate governance and internal control.This paper investigates the reciprocal relationships between corporate governance structure and internal control system via empirical methods based on theoretic analyses. The empirical research mainly applies principal components method and distills the principal factors of corporate governance structure and internal control separately. Then the principal components obtained are graded and used as dependent variables to make regression analysis.The thesis consists of five parts. The first part introduces the research background and significance. In this part, domestic and foreign research are reviewed and discussed. The second part is focuses on the basic theory of corporate governance and internal control. Inthis part, based on the principal-agent theory, stakeholder theory and contract theory, the relationships between corporate governance and internal control are analyzed. The third part analyzes the reciprocal relationships between corporate governance structure and internal control system from three aspects that are share equity structure, directorate structure and supervise institution. The fourth part is empirical research on the reciprocal relationships between corporate governance structure and internal control system of listed companies. The relativeness between internal control system and the main elements of corporate governance structure, and the relativeness between corporate governance structure and the main elements of internal control system are studied respectively. At last, based on the empirical research, the positive conclusions are obtained as below: First stockholders' stock rate is negatively correlated with internal control. The domination of stock power is positively correlated with internal control. The size of board of director is positively correlated with internal control. Annually salaries of high-grade managers are positively correlated with internal control. The internal control efficiency in the companies, which set up special committee is higher than that in those didn't set up. The rate of overhead expenses is correlated with governance structure. Net assets yield rate is positively correlated with governance structure. Per stock income is positively correlated with governance structure. According to the results above, governance structure and internal control system is correlated, they affect each other reciprocally.