Research On Market Reaction To The Information Disclosure Of Internal Control

The Sections404of the Sarbanes-Oxley Act of2002clearly defined the responsibility ofenterprise management, who should evaluate and report the internal control systems producingthe company financial reporting in corporate annual reports, and the external auditor, who shouldcheck the management’s evaluation and make the conclusion about the internal control systemand show formal opinion, for finance internal control. Since then the enforcement requirementsabout the internal control information disclosure has been formally proposed.Ministry of Finance in our country published relevant guidelines and developed a schedulein2008,2010, which claimed cross-listed company should firstly disclose their internal controlsystem from January1,2011. The notice in2011, required about68cross-listed companies and216companies to participate in the internal control standards pilot.The internal control self-evaluation reports of these284companies in2011and2012are theobject of this study. This article does research on the abnormal returns, the average abnormalreturns, cumulative abnormal returns, and select the pairing group to study, and gets conclusion:internal control self-assessment report has information content; mandatory disclosure of theinternal control self-assessment of the sample group are different from the control group in2011and2012, but the differences are not very significant. Further multiple regression analysis, wefinds in2012compared to2011, the internal control information disclosure of the impact on theshare price has been further improved, but in the entire internal control disclosure of information,the impact is more complex. To further study the market reaction to the quality of internalcontrol self-assessment reports, multiple regression analysis was used again, weakness was usedas the proxy of quality, and find that the company disclosed weaknesses are not significantlydifferent from the undisclosed groups. Finally, a number of comments and suggestions wereprovided.