The Empirical Research On The Impacts Of The Quality Of Internal Control On The Inefficiency Investment Of Listed Company

As is well known, financing decision-making, investment decision-making anddividend distribution policy are three major parts of the financial policies; are the coreissue of the three major financial theories, and the investment decision-making is thelinking bond between the financing and dividend distribution. In a macro sense,investment as one of the stimulating economy development "troika", is the engine of thenational economic development, and is also the driving force of social development. In amicro-scale, the investment determines the value-added of the company, because only thescientific and efficient investment decisions will bring more cash flow and increaseenterprise value. Investment is an important source of enterprises future cash flows, theintrinsic motivation of the company development. The investment efficiency is directlyrelated to corporate financing and dividend policy, meanwhile determines the size ofbusiness risk and future profitability, and even affects the overall evaluation of enterprisecapital market. But recently Chinese listed companies highly concerned about theproblem of financing, ignoring the investment efficiency problem. With the continuousdevelopment of economy, the progress of the society, the inefficient investment behaviorof listed company is urgently needed to govern. Internal control as a new, compliancewith the times requirements of the standardized system, the author combines it withinefficient investment of companies, and tries to explore the factor that influencesinefficient investment behavior from a new perspective.The method of this paper combines normative research with empirical research. Andthis article tries to discuss from the inner-control perspective which is based onurgent-solved problem of inefficient investment behavior of Listed Company. Firstly,state the research background, research significance and the innovation of this paper.Secondly, review research literature respectively from the inner-control and theinefficiency of investment. Combine with the asymmetry information theory, principal-agent theory and the theory of free cash flow to comb the correlation betweenthe quality of internal control with the inefficient investment behavior of company, andthen put forward assumptions of this paper. Finally, design the measure of inter-controlquality，download from CSMAR or manually collect empirical analysis data, and thenadopt regression analysis. The empirical results show that the higher of the inter-controlquality, corporate over-investment, under-investment and other inefficient investmentbehavior less likely to happen. When firms are flush with free cash flow, with theincreasing in free cash flow, the higher of inner-control quality, more be able to inhibitthe over-investment behavior. And this result supports the assumptions in this paper.Conversely, while corporate are short of free cash flow, with the decrease of free cashflow, the lower the inner-control quality, the more easily the enterprise leading toinadequate investment, and part the results support the assumptions. In this paper, thestudy both broadens the research scope of the enterprise’s inefficiency investment andpromotes the research on the economic consequences of internal control. And it hastheoretical and practical significance.