Research On The Market Reaction Of Internal Control Information Disclosure In Listed Companies

Since 2001,the eruption of the Enron and WorldCom incidents have been enough to reveal that driven by interest, senior managers stay out of the internal control, which makes the information disclosure of internal control lack of objectivity and impartiality. Then the United States Congress enacted "Sarbanes-Oxley Act," which execute strict standards on the internal control information in the disclosure.The act states that Chief Executive Officer (CEO) and Chief Financial Officer(CFO) or the one on the similar position must state that they are responsible for the efficiency of the design and execution of internal control in written form.The act also requires that the evaluation reports of the internal control on financial reports be disclosed with the periodical reports and verified by the accountants responsible for the auditing of the periodical reports. In China, with the perfection of capital market,the supervison of internal control information disclosure becomes more and more Standardized. June 2008,the Ministry of Finance and other 5 ministries issued" Basic Norms of Enterprise Internal Control", which requires that listed companies executing the norms assess the effectiveness of the internal control of themselves, disclose annual self-evaluation reports and hire accounting firms having the qualification of securities and futures offer support means for decision-making to audit the effectiveness of internal control. Adequate and reliable information disclosure of internal control not only helps improve the standards of enterprises'internal control but also offer the masses of investors support means for decision-making to improve the efficiency of capital markets. The event research method is employed in this paper to examine whether the internal control information is relevant disclosure to the stock price, that is to say whether the capital market can response to the internal control information disclosure, then perfect the standards and systems of the internal control information disclosure, enhance the level of investors'decision-making and promote the effectiveness of the internal control system operation.This paper is divided into the following parts:The first part is the introduction of this paper outlining background of topics, research significance, the viewpoints of scholars both at home and abroad, as well as innovations and flaws.The second part is fundamental analysis. Firstly, the connotation and contents of the internal control information disclosure are introduced; Secondly, the theoretical basis of the market reaction of the internal control information disclosure are combed systematically; Thirdly, laws and regulations of the internal control information disclosure are presented and then the paper processes all-around analysis of the current status of the internal control information disclosure; Finally, the paper introduces the mechanism about the market reaction of the internal control information disclosure.The third part is empirical analysis selecting 850 listed companies as the research sample, and adopting the event research method to examine the market reaction of the internal control information disclosure. The empirical results shows that the adequate disclosure of the internal control information has positive effects on stock prices and the inadequate disclosure of the internal control information has an negative effects on stock prices.The fourth part is the conclusions based on the above research, and give some policy advices for perfecting the information disclosure of the internal control in accordance with the conclusions.The paper's innovations and features lies in the fact that this article is based on the standard and empirical study methods, combined with the current status and problems of the internal control information of the listed companies in our country, provides advices for the perfection and standardization of the internal control information. In the empirical study, the paper uses the listed companies traded in Shanghai Exchange in 2008 as the sample, analyzes different reactions in the capital market of different internal control information disclosure, and uses relevant statistical test, ensuring the timeliness of the sample and reliability of the study results.