The Research On The Relevance Of Internal Control Quality And Corporate Value

Since the promulgation of the Sarbanes-Oxley Act, the construction of internal control system and the evaluation of its effectiveness have been the focus of theory and practice research. As a scientific system of corporate governance, the goal of internal control is consistent with business objectives. Moreover, the establishment and implementation of internal control play an active role in the modern enterprise management.In recent years, the internal control theory has been studied in depth, but the research productions studying the enterprise value from the angle of internal control are relatively few. Learned from internal and international experience, this paper is intended to investigate the relevance of internal control quality and corporate value through theoretical and empirical analysis method and attempts to provide helpful references for the development of the internal control.Firstly, this paper preliminary illuminates the research background, research ideas, research significance and so on. In the part of theoretical analysis, it systematically introduces the research of domestic and foreign about internal control, corporate value and their correlation. Based on the principal-agent theory and value management theory, this paper analyzes the relevance of internal control and corporate value and come into a conclusion that the quality of internal control has a significant impact on corporate value. In the beginning of empirical research, a comprehensive evaluation system of internal control is constructed to measure the quality of internal control. Moreover, this paper selects67listed real estate companies as samples from Shanghai Stock Exchange to explore the relevance of internal control quality and corporate value.Consequently, the study comes to the following conclusions based on the empirical analysis. Control environment, control activities and information and communication have significant positive correlations with corporate value. That means a good control environment and information communication and effective control activities can be promoted to increase corporate value, but an unexpected outcome is risk assessment and monitoring have negative relations with corporate value, which is inconsistent with the foregoing hypothesis. The comprehensive index of internal control showed a significant positive correlation with corporate value. In other words, the better internal control, the better development of the company. Finally, combined with theoretical and empirical analysis conclusions above, this paper puts forward the relevant recommendations on how to improve the internal control quality and proposes the inadequacies of this paper.This study not only broadens the research scope on internal control by proposing a comprehensive method to measure the quality of internal control, but also provides some new ideas on improving internal control system of Chinese listed companies.