A Study Of Relationship Between Board Features And The Effectiveness Of Internal Control Under Ownership Structure

With the rapid development of economy and the progress of economicglobalization, the establishment of modern enterprise system has become aninevitable choice for enterprise reform. The sound corporate governance and internalcontrol are two important aspects to establish and improve the modern enterprisesystem. Currently, how to improve corporate governance to improve effectiveness ofinternal control has become the focus of the theorists. Many scholars have alsoexamined the impact of the corporate governance structure on internal control fromthe ownership structure, board features and other aspects. They have also provided alot of valuable conclusions and recommendations. However, current literatures onlyconsider the effects of ownership structure and board features of internal controlseparately and ignore the interaction effect between the different corporategovernance mechanisms.Based on the current status of the internal control in China, we select somerelated indicators to establish an evaluation system of the effectiveness of internalcontrol and then use factor analysis to build a comprehensive internal control index toevaluate the effectiveness of internal control. By using hierarchical regression, weexam the relationship between board features and the effectiveness of internal controland further exam the moderating effect of ownership structure on the relationshipbetween board features and the effectiveness of internal control.In this paper, we focus on the manufacturing industry in Shenzhen A-share listedcompanies, and construct the regression model by using the sample data from2008to2012, it has finally reached the following conclusions:(1) Relationship between boardsize and the effectiveness of internal control is not significantly positive. Leadershipduality goes against improving the effectiveness of internal control. Independentboard is good for implementing the internal control system which can improve theeffectiveness of internal control. The relationship between board meeting and theeffectiveness of internal control is not significantly negative.(2) The ownershipstructure has a moderating effect on the relationship between board features and theeffectiveness of internal control. The ownership concentration and the nature ofownership both increase the negative relationship between the leadership duality andthe effectiveness of internal control. Both of them also decrease the positive relationship between independent board and the effectiveness of internal control. Theinsignificantly negative relationship between board meeting and the effectiveness ofinternal control is also decrease by the ownership concentration and the nature ofownership. Based on the above conclusions, this paper put forward some policies andsuggestions to improve the effectiveness of internal control.