A Study On The Relationship Of Internal Control Information Disclosure And Market Reaction

In China’s capital market, the investor access to corporate internal control information disclosure report-the internal control audit reports "or" internal control self-assessment report, investors, however, only whether these two ways to get real and reliable internal control information for their own investment decisions? In fact, I believe that both information disclosure can provide some internal control information, but has its flaws, so investors should find another way to get more internal control to compensate for the report disclosed deficiencies.Sustained attention of China’s capital market, the author notes Xinhua Pharmaceutical internal control report in2011, the CPA has issued a negative opinion, the financial report of the company with an accounting firm issued standard unqualified,and throughout the year, the Company has not issued any report disclosed that its internal control deficiencies. This into the corresponding interest Hanwang Technology penalized several times in2011, but internal control self-assessment report that their own internal control "significant deficiencies" at the end of the year, and in2012continue to be punished.The two companies has aroused the concern of the author, I believe that embodies the following questions:(1) internal control audit report due to the ability of Certified Public Accountants limited only to test internal control for financial reporting;(2) internal control audit select the time period of the test control can not cover the whole year, if from this time period far internal control deficiencies may be ignored by the Certified Public Accountants. In the case of Xinhua Pharmaceutical Were it not for the outbreak of time for the December30, may not be disclosed;(3) Certified Public Accountants may have some non-independence, and companies will therefore have greater room for maneuver;(4) and the self-assessment report does not have the objectivity of corporate disclosure, so the lack of reliability of the information.Thus, the two cases from different angles confirmed the author’s concerns: "Internal control audit reports and internal control self-assessment report" has its flaws. Therefore, this paper attempts to explore whether through another way to get the internal control information, so that the information obtained by sophisticated investors to compensate for the "audit report" and "self-assessment report or congenital or caused by human shortcomings.In this case, I will look at the "administrative punishment" that from the theory of signal transduction, the administrative penalty information itself can be passed deficiencies in internal control signal, and the severity of internal control sufficient to constitute significant deficiencies,as internal control deficiencies identified rationality. This signal is easily observed that the feasibility and need not repeat them here.Therefore, this paper will examine the purpose defined as:To investigate the "administrative penalties as an internal control information to identify the need for this approach, and thus achieve the purpose of sophisticated investors access to information and reduce the possibility of asymmetric information.The significance of this study is that (1) the market reaction, starting from the theory of signal transduction, to explore new access to information, there is a strong theoretical significance;(2) empirical conclusions, access to a wealth of information, thereby increasing investor access to the reliability and integrity of the internal control information, and then better judge the reliability of financial reporting, to make more rational investment decisions, there is a strong practical significance.According to the last statistical description and empirical research, this article concludes:Investors should be the "punishment" as internal control deficiencies disclosure of information, in order to better guide their investment decisions.