The Correlation Research On The Information Disclosure Quality Of Internal Control And Agency Cost-An Empirical Study Based On A-Share Companies Listed In Shenzhen Stock Exchange In2009

In recent years a series of financial scandal happened one after another due toinadequate performance of internal control information disclosure. It also constantly remindpeople the importance of strengthening internal control practices. The Enterprise InternalControl Basic Norms established and issued by The China Ministry of Finance, SecuritiesRegulatory Commission, Auditing Administration, Bank Regulatory Commission, andInsurance Regulatory Commission in June2008and The Enterprise Internal Control BasicSupporting Guidelines issued in April2010demand all the listed companies to discloseinternal control report, which worked out by Board or Audit Committee and included auditopinion of independent accountants. Whether Internal control information disclosure canreduce agency costs? This article is based upon that background. This article investigate therelationship between internal control disclosure of information quality and agency costs. Onthe basis of the study and review of relevant literature. This article expand further researchpath along relevant literature. Firstly, This paper applies Efficient market hypothesis,contract theory and Signalling theory to theoretical analyze Internal control informationdisclosure. We use Signalling theory and the Analytic Hierarchy Process method to designthe internal control information disclosure coefficient which is a coefficient can be used tomeasure the quality of Internal control information disclosure. We make an empiricalresearch based on the internal control information disclosure coefficient. Secondly, Thisarticle divide Agency Costs into equity agency costs, debt agency costs as well as agencycosts between large shareholder and minority shareholders. Finally, we examine the relationbetween the internal control information disclosure coefficient and Agent Cost using thesample of the listed companies of A share in stock market of Shenzhen in2009. The resultsshow that the internal control information disclosure coefficient of the listed companies arein a low level. There is negative correlation between the internal control informationdisclosure coefficient and agency costs of equity as well as agency costs of debt. At thesame time, when the internal control information disclosure coefficient is high, the agencycost between Substantial Shareholder and Minority shareholders is in a low level.