Study On Relationship Between Information Transparence Of Internal Control And Company Performance

Internal control is an important part of corporate governance mechanism, and information disclosure is the source of information in capital market, also it is the significant institutional foundation to protect the interests of investors. The information disclosure about internal control of the listed company is or not transparent related to the effectiveness of corporate governance mechanisms and the vital interest of outside investors. In recent years, scandals of listed companies at home and abroad are mostly owing to the failure of their internal control caused by low information transparence. For that reason, China Shanghai Stock Exchange and Shenzhen Stock Exchange respectively promulgated the "Shanghai Stock Exchange Guidelines for Internal Control of Listed Companies" and the "Shenzhen Stock Exchange Guidelines for Internal Control of Listed Companies" in 2006, required listed companies to increase information disclosure of companies' internal control, and encouraged listed companies to provide self-evaluation report on internal control by listed companies with verification. The issue of this regulation is to improve the information transparence of listed companies' internal control.The improvement of information transparence on internal control will bring additional economic costs for the listed companies, but it also can reduce the information asymmetry in capital market, mitigate the agent problems, cut down the cost of equity capital, and ultimately improve the company's performance. So what kind of effect caused by the improvement of information transparence on internal control to the listed companies' performance? Is there any relationship between information transparency of internal control and company performance? The questions above have significant theoretical and practical value to consummate the formulation of relevant policies, regulate the information disclosure of internal control, strengthen capital market supervision, and protect the interests of outside investors. Therefore, we examined the relationship between information transparency of internal control and company performance of manufacturing corporates in Shanghai Stock Exchange from 2006 to 2008 in this paper.This paper consists of six sections: the first section presents the background and significance of the research, methodology and the basic framework, also it illustrates the innovation and limitation of the paper; the second section introduces the relevant theory basis about information transparency of internal control and the research documents at home and abroad; the third section put forward the measure standard for information disclosure of listed companies' internal control, and describes the present situation of information transparence on internal control by statistical analysis; the fourth section examines the factors affects information transparence of internal control, and find that company performance has a significant effect on information transparence of listed companies' internal control; the fifth section uses empirical test to analyse the impact on company performance caused by information transparence of internal control, and the result shows that information transparence of internal control and company performance are significantly positive correlated, it means that higher information transparence of internal control helps the improvement of company performance; the sixth section is conclusions and policy suggestions, also include the direction of future improvement.