The Impact Of Internal Control Disclosure On Equity Agency Costs

Since America enacted the Sarbanes-Oxley Act in2002, the internal control disclosure has been promoted worldwide. It becomes an important means to regulate the internal control of enterprises, and to protect the interests of investors. Can internal control disclosure of listed companies in China bring the Gospel to investors and truly protect their interests? This paper tested it from perspective of equity agency costs.A theoretical part and an empirical part are included in this paper. The theoretical part firstly describes the definition and historical evolution of internal control disclosure, the concept and classification of equity agency costs, then reviews and comments on the relevant literature. On basis of relevant theory, including the principal-agent theory, asymmetric information theory and signal transmission theory, we analyze the mechanism of internal control disclosure affecting equity agency costs. In the empirical part, we take data of Shanghai A-share listed companies from2009to2011as samples, and select disclosure of internal control self-assessment report and disclosure of internal control attestation report as independent variables, management expense ratio and the occupancy rate of funds as dependent variables. Then we use descriptive analysis, correlation analysis, multiple regression analysis and mean analysis to analyze their relationship.The empirical results show that:(1) The disclosure of self-assessment report can help reduce the agency costs of controlling shareholder;(2) The disclosure of self-assessment report can also reduce the agency costs of controlling shareholder;(3) The disclosure of attestation report can reduce the agency costs of manager to some extent;(4) The disclosure of attestation report can also reduce the agency costs of controlling shareholder;(5) The agency costs of manager is not significantly different between the listed companies disclosing both reports and the listed companies only disclosing self-assessment report;(6) The agency costs of controlling shareholder of the listed companies disclosing both reports is significantly lower than the listed companies only disclosing self-assessment report.