The Effect Of Internal Control Quality On Business Performance For Listed Companies

The business performance represents results of enterprise operation management, andit is the best indicator of enterprises operating results. According to the decision-makingorganization theory, Shareholders hope to improve the business performance for increasingtheir rights and interests. However based on the principal-agent theory, shareholders canonly influence clients, and they can not make decisions directly. In these years, whileChinese economy develops rapidly, there are numbers of new phenomena, new problemsand new contradictions in the macro economic and the financial field, such as the relativelybackward system development, the overmuch macroeconomic regulation, the governmentcontrol and so on. Different inside and outside environments of listed companies leaddifferent effects of internal control quality on business performance.In this study, based on the decision-making organization theory, the principal-agenttheory, and the asymmetric information theory, the method of combining the normativeresearch and the empirical research was used to analysis the effect of internal controlquality on business performance. In the empirical analysis, the hierarchical arithmeticaverage method, the factor analysis method and the Analytic hierarchy process were usedfor the quantitative business performance. According to the COSO internal controlintegrated framework, internal control quality was refined into five indicators includingcontrol environments, risk assessments, control activities, information communications andsupervision. Based on the existing research, the effect of internal control quality onbusiness performance was verified overall, and the difference of the effect from differentcontrolling shareholder nature was also verified.Innovations in this paper:(1) The effect of internal control quality on businessperformance was researched and the basis of the company internal control was provided,for the interest of shareholders.(2) Based on the widespread data which is from all thedomestic listed companies, the conclusion is more comprehensive and reliable.(3) Thehierarchical weighted arithmetic average method and the hierarchical structure model wasused to calculate the business performance. Meanwhile, the factor analysis method and theanalytic hierarchy process were also used in the robustness analysis, so the model morereliable and effective.