Internal Control、the Characteristics Of The Board Of Directors And The Management Agency Cost

The appearance of modern companies leads to the separation of ownership andmanagement rights, so it comes with the problem of agency. The agency problembetween shareholders and operators is always the hot research topics of academia. Atpresent, the researches of Agency problems mainly focus on the relationship betweencorporate governance and Agency Cost at home and abroad. The fundamental cause ofagency problem is information asymmetry The internal control is very important, on onehand, it is an important guarantee of financial statements information reliability, on theother hand, it could directly restrict the lower level managers. So, could the internalcontrol effectively restrain managers Agency cost? The board of directors in the core ofcorporate governance, so, could the characteristics of board of directors affect thediscretion of the Manager Agency cost?There are intricate relations between the internalcontrol and corporate governance, so if both internal control and the board of directorscould affect Agency cost, there would be complementary effect when they exist at thesame time?This paper collected empirical data of Chinese non-financial main board listedcompanies in2008-2012.First of all, choosing indicators according to the realizationdegree of internal control goals, then, the internal control index is obtained by principalcomponent analysis, using it to measure the quality of internal control.On this basis, thearticle separately studies whether the quality of internal control and the boardcharacteristics could Management Agency Cost or not.Then the article studies whatwould happen to the Management Agency Cost when both internal control and the boardof directors exist.We get the following conclusions through the empirical test.①The Internal Controlcould restrict the Agency Cost effectively;②Both increasing the scale of the board ofdirectors and separating the position of chairman and general manager could effectivegovernance agency problem;③Neither raising the proportion of independent directorson the board nor increasing the number of board meeting could effectively solve theproblem of agency;④In solving agency managers, internal control and the board has acomplementary effect.At present, the agency problem is serious, to deal with it, enterprises should strengthen the construction of internal control, setting up reasonable structure of the boardof directors.