Research On The Effective Determinants Of Central Enterprise Internal Control

With the more complex market economy environment, asset losses resulted fromthe controllable risk failure happen frequently in enterprises. In order to guard againstsuch risk and reduce the losses, the market requires higher effectiveness of enterpriseinternal control. Due to particularities of Central Enterprise assets, and the greatinfluences on the national economy, the market and the government treat the CentralEnterprise internal control with high requirements. In2013, among the63listedcompanies which are warned to be delisted, the number of Central Enterprise is17,accounted for27%, the number of Local State-owned Enterprises is14, accounted for22%, and the operating performances of State-owned Enterprises have been questioned.In June2006, the State-owned Assets Supervision and Administration Commissionissued "China Central Enterprise Comprehensive Risk Management Guidelines", ittended to strengthen the Central Enterprise risk control. In December2013, the StateCouncil issued "Notifications about Carrying out Comprehensive Risk ManagementMeasures of Central Enterprise in2014”, it further strengthened construction ofenterprise internal control. In this background, how to improve the effectiveness ofCentral Enterprise internal control has become the focus of academic and practicalcircles.First of all, this paper analyses the effectiveness of enterprise internal control fromthree perspectives: the audit, the management and the performance of enterprise. And italso analyses how the state shareholders holding proportion and personnel salary rulesaffect the effectiveness of Central Enterprise internal control. Then, this paper adoptsthe target index system evaluation method, selects16financial indexes combined withthe effective target of enterprise internal control defined before, and creates theevaluation index system of enterprise internal control. Next, this paper selects the63Central Enterprise holding listed companies boarded in the middle of the Shenzhenmain board as the research objects, contributes the index about the internal controleffectiveness of Central Enterprise listed companies by using factor analysis method,then sets up4models and analyses the determinations of internal control for CentralEnterprise listed company by using the descriptive analysis and multivariate regression,the above analysis is to prove the determinations of internal control for CentralEnterprise.The empirical research conclusions show that the state shareholders holdingproportion, the management compensation, and the employee compensation haveremarkable influences on the effectiveness of Central Enterprise internal control. Withthe higher state shareholders holding proportion, the effective level of CentralEnterprise internal control will be lower. With the higher management compensation,the effective level of Central Enterprise internal control will be lower. With the higherthe employee compensation, the effective level of Central Enterprise internal control will be higher. According to the empirical research conclusions, the paper puts forwardsome specific measures to improve the effectiveness of Central Enterprise internalcontrol. Firstly, they should optimize equity structure and promote the reform ofstate-owned property rights system actively. Secondly, they should nominate themanagers with market mechanism and increase management equity proportion. Thirdly,they should formulate employee compensation incentive policy reasonably and establisha good corporate internal control culture.