News Exposure, Government Intervention And Enterprise Internal Control System Evolution Study

In contemporary society, managers and regulators pay more attention to theenterprise internal control system. One good internal control system is able to protectthe safety of assets, ensure compliance of management, improve performance, andreduce business risk. At the same time, the academic study of enterprise internalcontrol system has been developed too, and scholars have researched enterpriseinternal control system from different angles. However, most scholars only focus onthe effectiveness of the internal control system of enterprise, as well as the factorswhich affect the effectiveness, and few scholars study the evolution of internalcontrol system. What’s more, in the existing literature scholars mostly analyze theevolution of internal control system from the theoretical angle, explaining the internalcontrol evolution patterns. This article regards the enterprise internal controlsystem evolution as explained variable, to study factors which influence the enterpriseinternal control system evolution. And this paper selects the negative news reports ofthe mass media as explanatory variable, to study on how the media exposure affectsthe evolution of enterprise’s internal system, and whether the negative newsinfluences are different under different extent of government intervention.This article has combined normative research and empirical research, and selectsthe enterprise internal control system evolution as explained variable, the negativereports as explanatory variable, and the degree of government intervention as regulatevariable, to test the media exposure’s effects to the evolution of internal controlsystem. The study results show that mass media exposure, as one company exteriorgovernance factor, will induce the enterprise induced institutional change, and play arole in promoting the evolution of enterprise internal control system. Moreover,negative news will also increase the regulators’ attention to the named company, andincrease the degree of government intervention to one enterprise. The result is toaccelerate enterprise induced institutional change, or changing induced institutionalchange to mandatory institution change, or directly inducing enterprise compulsoryinstitution change, and finally to strengthen news exposure’ ability of promotingenterprise internal control system evolution.The article’s research results reveal the rules of evolution of enterprise internalcontrol system, and how government intervention as regulate variable work.Moreover, based on the study results, this paper puts forward suggestions to improve enterprise internal control system construction, and to strengthen mass media’ssupervision function.