The Internal Control Self-assessment Report Disclosure Level And Corporate Performance

Since the20th century, financial problems have led listed firms into various bad situations. Thus, Internal Control has become a vital role in improving the qualit of listed firms’internal management. At the same time, Internal Control has drawn the attention either from investors or regulators. In2002, the United States published the Sarbanes-Oxley Act, which aimed to improve the corporate governance and to monitor the internal control quality, in order to contain the situation of financial fraud. Internal Control plays a vital role in the corporate governance, and also, it gives the foundation to protect the interests of medium and small investors. This Act has made a profound influence on other countries; many others countries started imitating America and publishing their own Acts of Internal Control. In order to cultivate the listed firms to establish a scientific and effective Internal Control System, in2008, the Chinese Basic Norms of Enterprise Internal Control was published by the China’s Ministry of Finance, then the Ministry of Finance also carried out a Guideline for the Chinese Basic Norms of Enterprise Internal Control in2010. Chinese listed firms were required to improve their internal control quality since the lth, Jan,2012. These listed firms include the main boards of Shanghai Stock Exchange and Shenzhen Stock Exchange. Besides, the Guideline for the Chinese Basic Norms of Enterprise Internal Control will also be implemented in small and medium-sized board and germ listed firms. This guidance requires the firms to conduct effective internal control system and carry out an Annual Internal Control Self-assessment Report; meanwhile, these firms should hire professional accounting firms, which have the certificated securities and future business, to examine and audit the effectiveness of their Internal Control Self-assessment Report, publishing auditing report. However, whether this guidance fits for the China’s present macro-environment or not? Does the Disclosure of Internal Control Self-assessment Report provide the useful information for the management layers of firms and the outside investors? Additionally, whether the Internal Control Self-assessment Report Disclosure Level is able to improve the cooperate performance or not? Does the improvement of internal control can be helpful in improving firms’development? All these questions that I mention above are needed to be researched.Under the background, this research is based on the situation of the disclosure of firms’Internal Control Self-assessment Report, using the data from manufacturing firms of the Shenzhen Stock Exchange Main Board as research samples. This research tries to explore the relationship between the Internal Control Self-assessment Report Disclosure Level and Cooperate Performance, thus, it can be used to examine the effectiveness of this internal control policy. From the perspective of the normative analysis, this research is based on prior literatures from China and abroad, which gives definitions of the ideas including the Internal Control, Internal Control Self-assessment Report and Cooperate Performance. Then, the Principal-agent Theory, the Signal Transmission Theory, the Information Asymmetry Theory and the Theory of Fiduciary Duty are employed to analyze the relationship between the internal control self-assessment report disclosure level and the corporate performance. Based on the aforementioned analysis, the point of the research will be found and my assumptions are pointed out as well. In the empirical research, firstly, I selected433manufacturing firms from Shenzhen Stock Exchange Main Board, picking out the aforementioned firms’internal control self-assessment report. Secondly, I built up an evaluation system to evaluate the internal control self-assessment report disclosure level. According to the evaluation system built by myself, I used the content analysis method to analysis each internal control self-assessment report and collected433firms’ICDL. Thirdly, I chose ROA, ROE and EPS as the evaluation index to evaluate corporate performance, at the same time, I chose size, financial leverage, ownership concentration and share ration of the largest shareholder as control variables. Fourthly, I used SPSS18.0to do Descriptive Analysis and Correlation test, then using WLS to examine the hypothesis1. And the hypothesis1was proved. After that, I collected annual reports from aforementioned433firms to get their CEA and R&D and found that412firms publish their CEA and R&D. I regarded the412firms as a sample to test hypothesis2, using the TOP, CEA and R&D as control variables. I use Descriptive Analysis and Correlation Test and Regression Test to check the impact of corporate performance on ICDL. At last, the hypothesis2was proved.There are some conclusions:①The overall situation about the internal control self-assessment report disclosure level are average.②Through WLS, Internal Control Self-assessment Report Disclosure Level has a positive influence on firms’ corporate performance. Through regression test, corporate performance has a positive impact on internal control self-assessment report. And R&D as a factor has a positive impact on ICDL; however, CEA and TOP have negative impact on ICDL.③The internal control self-assessment and corporate performance affect with each other.Based on the result of empirical research, I give some suggestions as:①It is necessary to improve the firms’ internal control self-assessment report disclosure level②The evaluation system of internal control self-assessment report needs to be designed in a scientific and effective way.③The manufacturing firms need to increase their R&D expenditure, which aims to develop their innovation ability and competitiveness.