A Study On The Correlation Between Internal Control Forensic, Ultimate Controlling Personality And Equity Capital Cost

With Enron、World·Corn and other financial fraud cases exposure, the Congress of USA promulgated Section404requirements of "Sarbanes-Oxley Act" in2002,when public accountants corporation audited corporates’ financial report and internal control information, they must review and comment for the effectiveness of the enterprises’ internal control information and systems.However, our internal control attestation become a gradual developmen state.In2010, Our country’s "Enterprise Internal Control Guidelines"requires Public Accountants corporation which released effective advice for internal control information quality and systems,and for non-significant of internal control deficiencies conduct description. Accordingly, in our country of internal control information disclosure and internal control attestation reports of relevant cases, it is high time for government and regulatory authorities to provide some basis policies for our country’s internal control attestation disclosure. Internal control disclosure of information is an important factor which affecting China’s capital market, timely, reliable, accurate and true disclosure of information will lead to a variety of economic consequences.Maintain marketing order and protect the interests of outside investors. Internal control disclosure of information will lead to a variety of economic consequences, the cost of equity capital of the enterprise as one of them got the attention of scholars. The cost of equity capital is an important symbol when enterprises conduct investment, financing and assessment,and is currently one of the hot issues of common concern of theory and academia. Most domestic and foreign research conclusions show:the high quality information disclosure of internal control attestation can effectively reduce the cost of equity capital of enterprises. In order to improve market efficiency, investors will strengthen mining internal controls information. Therefore, the business executives in order to get investment,they will be more proactive to disclosure internal control information attestation report, improve competitive of disclosure information, thereby reducing the cost of equity capital of the enterprise. Some scholars also studied the cost of equity capital of enterprises which mainly focused on the model study of the cost of equity capital and enterprises’ characterize factors such as the micro-level, and there are also some scholars applied characteristic of ultimate controller of corporate governance to the study of on the cost of equity capital.Will the characteristic of ultimate controller et. institutional environment produce any influences to the cost of equity capital?If the characteristic of ultimate controller will affect the relationship between internal control attestation and the cost of equity capital?This paper combines the normative and empirical research method. Firstly, this paper use the standardized research methodology to review the theoretical basis and related foreign and domestic research literature of the company’s internal control attestation, characteristic of ultimate controller and cost of equity capital.And then,introduces the the specific research questions,which of Research on the Correlation of internal control attestation, characteristic of ultimate controller and cost of equity capital. Finally, based on the basic theory and relevant literature, we the use of empirical research methods which constructs the theoretical model of the relationship between internal control attestation, characteristic of ultimate controller and cost of equity capital,studying the intrinsic relationship between the three variables. After control the firm size, financial leverage, profitability, business growth, business risk, liquidity and book-to-value related research variables, by taking783listed companies’ internal control attestation reports in Shanghai Stock Exchanges from2008to2012as research objects. Using PEG model identifies whether the influence of voluntary internal control attestation of listed companies on the cost of equity capital has characteristic of ultimate controller effect. The results show that internal control attestation and characteristic of ultimate controller can really affect the cost of equity capital of the enterprise, and characteristic of ultimate controller of the will affect the intrinsic relationship of internal control attestation and the cost of equity. Specifically, voluntary internal attestation of listed companies could convey positive signals to lower the cost of equity capital significantly, at the same time, to a certain degree, characteristic of ultimate controller provides information quality guarantee of internal control attestation reports,reduce estimation of investor to the enterprise risk,thereby lower the cost of equity capital.Based on the relevant theoretical studies, this paper expected following three innovations:First, reviewed previous research literature, the author of this paper confused the internal control information and internal control attestation information, which have no clearly defined. But this paper conduct a clear discrimination, to the concept of the used variables. Then in the internal control attestation research field, this article firstly constructs the theoretical model of the relationship between internal control attestation, characteristic of ultimate controller and cost of equity capital, and proposed related research hypotheses. Second, this paper used five years datas from Shanghai Stock Exchange listed company as the research sample, broaden the breadth of data time span areas and sample selection. Analytical methods are relatively novel, which break through the limitations of previous researches. Third, based on previous researches, the internal control attestation measures exceeded the original method which making this indicator more refined and its findings more convincing.