A Research On The Effect Of Ownership Structure On The Quality Of Internal Control Information Disclosure

British historian Arnold Toynbee once said, the origin of a country or a nation’s decline is from its inside, and external forces just give her the final blow. Internal control, as important "internal strength" of modern companies, its quality can often determine the sustainability and health of companies’ development. However, people did not pay close attention to internal control until Enron, WorldCom and other super companies collapsed because of their internal control failures and financial frauds. With the promulgation of "Sarbanes-Oxley Act", the attention of internal control continues to rise, people gradually realize that if a company has a well-designed, executed and effective internal control system, then they can believe that the information of the company’s business activities and operating results they get from financial statements or other reports of its disclosure is authentic and integrated, and thus they can further confirm that the investment assessments or decisions they made based on these reports are accurate. The requirements for mandatory disclosure of internal control information in "Sarbanes-Oxley Act" initially meet investors’ basic needs of knowing the condition of companies’ internal control, and provide them new evidences of judging companies’ value.In our country, the awakening of internal control is late. However, in recent years, the construction of internal control standard system is rather effective. Normative documents have been promulgated and implemented, which provides companies advanced guidance so that they can construct and improve their internal control successfully. Referring to the successful experience of "Sarbanes-Oxley Act", we also began to encourage or require companies to conduct internal control self-assessment and disclose results regularly. But the results show that the quality of disclosed internal control information is low as of now. Internal control information disclosure as a kind of information disclosure behavior, the quality of disclosure must be subject to the manager’s behavioral approach; corporate governance structure can determine the behavioral approach of managers; the basis of corporate governance structure is ownership structure. Therefore, if we want to improve the quality of information disclosure originally, to start from ownership structure can be a feasible method. So, what kind of ownership structure can help make higher quality of internal control information disclosure? Furthermore, how to change the ownership structure of companies in order to improve the quality of internal control disclosure, and change "I have to disclose" to "I want to disclose", so that internal control information can function well in the capital market? This is the problem that this paper is about to solve.This paper is divided into seven parts:Introduction part includes research background, the theoretical and practical significance, the main content and framework, the main method and innovation points of this paper.Literature review part through reviewing existing literature, summarizing the main angle of previous studies, methods, and results achieved, and then point out the deficiencies of present studies and the directions of future research on internal control information.Current situation of ownership structure and internal control information disclosure part mainly describes the status of the ownership structure and internal control information disclosure of companies, analyze problems and point out possible relationship between them.Concept definition and theoretical analysis part firstly defines the concepts of ownership structure, internal control and internal control information disclosure, then use the principle-agent theory, information asymmetry theory and signaling theory to explain how ownership structure affects internal control information disclosure.Study design part presents five hypotheses of this paper, then designs variables and definitions; then explains the empirical model, sample selection and data sources of this paper.Empirical analysis part contains data statistics and regression with an empirical model, and analyzes the results, does robustness test to ensure credibility of the results. Descriptive statistical analysis of the results showed that:the internal control information disclosure of current A-share listed companies in Shanghai Stock Exchange Main Board is not yet in full compliance with the internal control requirements of the relevant specifications; the quality is to be improved. Specifically, the internal control information disclosure is with timeliness and authenticity, but its lack of integrity; in all of the secondary indicators of integrity, monitoring and internal control environment have relatively high scores, but they also fail to reach the "pass line"; information and communication, control activities have relatively low scores and risk assessment has the lowest score. There are many problems existing in internal control evaluation reports:inconsistent reporting formats, non-disclosure of internal control deficiencies standard, disclosure without substance, missing some parts of contents of the standard rules on purpose, the norms when companies disclose their internal control information should follow are not clear and so on. The existence of these problems not only reduces the comparability of internal control information, and even makes internal control information disclosure to lose its original meaning. Ownership concentration of listed companies is still relatively concentrated, the shareholding ratio of first major shareholder is high, and the second to the fifth shareholders’ability to check and balance the first major shareholder is weak; the shareholding ratio of institutional investors has increased, but there are listed companies with no institutional investors to participate in; the shareholding ratio of senior management is very low, and many companies still have no managerial ownership. Multiple regression analysis showed that ownership concentration, the nature of controlling shareholder and the shareholding ratio of institutional investors have adopted a t-value test, but balances of ownership failed to pass t-value test, and the shareholding ratio of senior management is the opposite of what I expected.Conclusions and suggestions part proposes appropriate measures and policy recommendations, including (1) continue to optimize the ownership structure;(2) develop institutional investors vigorously;(3) mobilize the initiative of employees;(4) regulate the content and format of internal control evaluation report;(5) establish responsibility mechanisms of internal control information disclosure.The innovation of this paper is mainly reflected in:(1)this study explores the relationship between ownership structure and the quality of internal control information disclosure;(2)the evaluation system I build includes timeliness, authenticity and integrity as first level indexes, they involving ten second level indexes, and the second level indexes involving forty third level indexes, this ensures my assessment more accurate;(3)make an analysis of China’s current ownership structure and internal control information disclosure situation, try to provide new ideas about how to improve the quality of internal control information disclosure and optimize ownership structure of the company. The shortcomings of this paper are:design of indexes can be reconsidered; the veracity of evaluation can be improved; the number of samples is limited; the choice of controlled variables can be reconsidered. Future research can consider:building evaluation system of internal control information disclosure quality, internal control information disclosure content and format for companies in different industries, motivation for high-quality internal control information disclosure and cost-effectiveness of companies’ internal control information disclosure, etc.