Research On The Evaluation Of Cost-effectiveness Of The Internal Control Of Listed Companies

Since the financial crisis in2008, the internal control of listed companies has been a hot topic in thetheoretical circles. Internal control evaluation, the self-assessment of its internal control in the listedcompany, gradually transits from the voluntary disclosure stage to the mandatory disclosure stage. Previousstudies have shown that the market reaction to the internal control evaluation is well, and its benefits havebeen fully affirmed. However, many listed companies and research institutions complain about the highcost of the disclosure at the same time. How is the cost-effectiveness of the internal control evaluation oflisted companies? Whether the good market efficiency after disclosing can make up the huge cost we havespent or not? This issue has been highly controversial, but the theorists have just researched the listedcompany’s internal control evaluation’s costs and its benefits respectively and there are few research articleswe can combine with. This article, which is researching on the cost-effectiveness of the internal controlevaluation of the listed company, hope can provide some theoretical support for mandatory disclosure ofinternal control evaluation.This paper is divided into five parts. The first part is an introduction which introduces the backgroundand significance of the research, domestic and international literature review, ideas and methods of theresearch, as well as its major innovation and disadvantages. The second part is related conceptual overviewand basic theoretical foundation, the main internal control evaluation and cost-effectiveness of relatedconcepts, and simple exposition of the principal-agent theory and stakeholder theory. The next third andfourth part is the focus of this article. It analyzes the evaluation of the cost-effectiveness of the internalcontrol of listed companies from the measurement of the angle and perspective of game theory. Finally, itmoves on the conclusions and recommendations of this article.The article is under the guidance of principal-agent theory and stakeholder theory. It mainly usesstandard research methods of internal control over financial evaluation of the cost-effectiveness study. Thecharacteristic of this article is that the cost and benefit of the listed company’s internal control evaluationcan be brought together to study on the topic, which makes the study on the evaluation of internal controlmore comprehensive. On research ideas, it learns from the existing studies on the financial information disclosure of the cost-effectiveness, focuses on the intangible costs and intangible benefits which aredifficult to accurately measured, and introduces the social value factors, and uses the cost-benefit analysisof listed companies internal welfare economics to study the evaluation of the cost-effectiveness of internalcontrol of listed companies. On the content, from the point of view of the measurement, it uses integratedscore evaluation tangible cost-effective and intangible cost-effective and comprehensive analysis andevaluation of internal control of listed companies, and this angle of internal control of listed companies willneed to quantity the evaluate the costs and benefits, but due to the process of qualification requires a lot offorecast, and it is subjective, so this angle has certain limitations. So this article analyzes thecost-effectiveness of the internal control evaluation of listed companies from a Game Theory perspective,which mainly selects three representative stakeholders, as listed companies, regulators and investors to goon the Game analysis. The analysis between the listed companies and regulators shows that when theprobability of the regulator reaches or exceeds a certain range, a listed company will select to disclosure theevaluation of the internal control of listed companies. And the analysis between the listed companies andinvestors shows that considering the long-term interests, the listed companies also tend to disclose theinternal control evaluation.