Information Disclosure Of Internal Control And Investors’ Protection

The disclosure of the listed companies’ information is a guarantee to the healthydevelopment of the stock market. Perfect information disclosure not only reduces theinformation asymmetry, but also reduces the transaction cost and optimizes theallocation of resources. Through the information disclosure, investors can promptly beaware of the performance, financial results and cash flow of a company. As animportant part of corporate government information, control information can helpinvestors deeply and comprehensively grasp the enterprise’s operation situation.Therefore, disclosure of the internal control what is the core of non-financialinformation can not only reflect the implementation of responsibility entrusted by theagent, but also strengthen the supervision to the agent and help the investors to makedecisions.This paper selects related indexes from the relevance and reliability of theinternal control information, then calculates the index of the information disclosurequality of the internal control through the entropy model. After an empirical study onthe quality of information disclosure and the two types of agency cost with samplesfrom68domestic and foreign listed companies in2011and another216voluntarypiloted listed companies, we give theoretical basis to mandatory internal controldisclosure regulations, thereby encourage more and more listed companies to discloseinternal control information voluntarily. It’s of great theoretical significance andpractical significance.This research first briefly introduces the development process of the internalcontrol disclosure of the listed companies,then gives economics explanation to thetheory of internal control disclosure based on the principal-agent theory, informationasymmetry theory and signal transfer theory, and analyses the investor protectiontheory from the contrat and legal theory. Then after an empirical study on therelation between the calculated index of internal control disclosure and the two typesof agent cost, we can find that the quality of a companies’ internal control disclosureis on negative correlation with the agent cost. In the end,we give some suggestionsand set forth the research deficiency.The innovation of this paper is that we selects related indexes from the relevanceand reliability of the internal control information and calculates the index for thedisclosure of the internal control information through the entropy model. While previous studies calculated the quality of internal control disclosure just by measuringthe amount of the information or whether a company disclosing the internal controlself evaluation report or the internal control auditing report. In addition, the rate ofdividend payments is used to give a further research on the influence the internalcontrol disclosure towards the investors’ protection.