Game-Theoretic Analysis On Internal Control Of Listed Companies

The process of internal control's making and performing is the process of reacting to each other and trending to a balance about corporate governing board, managers, executants and supervisors, which is belong to the game theoretic analysis. The game analysis of internal control has important practical significance to rule internal control system's design in our country.The conditions of internal control are presented first from five components: control environment, risk assessment, control activities, information and communication, monitoring. Complete information static game, complete information dynamic game and boundedly rational best-response coordination game are used to analyze internal control. In the basis of analyzing the influencing elements about internal control, different benefit participants' strategies about internal control in the listed companies are analyzed with the game methods, especially the "Backwards Induction". It's proved that the listed companies' internal control performances are influenced by different benefit participants' behavior greatly. The performances of internal control are influenced greatly by strategies of governing board and other benefit participants made from their benefits. Reinforcing the punishment to the governing board can avoid governing board deceiving; at the same time make the supervisors lazier. Reinforcing the punishment to the supervisors can make them enhance supervising, and governing board reduce exceeding their authority, and then supervisors will reduce their diligence. The game shows that outer force to the governing board and supervisors is limited, and the result of game is decided by both sides' benefits. From the game, the punishment to the supervisors should be reinforced in order to make the exceeding of their authority has no benefits and the supervisors' responsibilities should be nailed down. In the internal check of control activity, complete information multistage game is used to analyze how to avoid staff stirring up collude, cahoots responding collude and eventual collude being succeeded. Through listing each other's benefit function, we can know that as long as listed companies pay more than the colluded benefit for agitator and cahoots, the collude will be smashed successfully. The result of analyzing is the work is divided more complex, the more persons needed to be stirred up and it is more beneficial to listed company. Using the boundedly rational best-response coordination games, we can know that as long as every department believes each other, internal control can be performed effectively. Establishing favorable enterprise's culture help get effective performances of internal control.Finally, the author suggest the safeguard mechanism of the internal control system from four aspects: perfecting corporation governance; eliminating inducement to break out the system; emphasizing the informal internal control system; establishing the information system mechanism.