Study On The Relationship Between Effectiveness Of Enterprise Internal Control And Operating Efficiency

In recent years, the importance of internal control construction which aims to enhance the company’s marketing value has obtained more and more academic and practical attention. The Ministry of finance and the other four ministries have launched densely a series of laws and regulations on internal control system. All listed companies have been asked to disclosure internal control information. In the mean time, many researchers conducted in-depth research. These studies mainly focus on the effect of internal control system as the audit method, stressing on the function of enhancing the reliability of financial reporting. Regarding to the COSO internal control framework, the guarantee of the reliability of financial reporting is just one goal of the internal control. More importantly, we should realize the effect of improving the companies’ operating efficiency. As a result, we should put more attention to the value creating of internal control and the author hopes to make a little breakthrough in this field.Cash is regarded as the "blood" of the company, so its importance to the value of the company is self-evident. The liquidity of cash plays an irreplaceable role to the enterprise operation and cash holdings is viewed as a financial and operating strategic. Since the late90s of last century, researchers have turned to focus on the problem of cash holdings and conducted a series of academic discussion. Enterprises and scholars concern how much cash holdings could maximize the enterprise value. Information asymmetry and agency problems are two important factors that affect the value of a company’s cash holdings. While internal control plays as an important regime arrangement role in the company, it can effectively alleviate the financing constraints caused by the information asymmetry problem. It can also reduce the agency costs caused by the manager and controlling shareholders encroach on the corporate capital. So this article will study the impact of the internal control on the value of cash holdings and the impact on the efficiency of the enterprise management. In the process of empirical research, it constructed the financial data of all listed companies with A-shares issued in Shanghai and Shenzhen stock exchanges during the period2009to2011in order to test the relationship between the effect of internal control and the value of cash holdings. The empirical result shows that the good effect of internal control are related to the value of cash holdings correlated, it is the higher the degree of internal control, the higher value of cash holdings. Then we empirically examine the influence of firms’ external financing constraints on the market value of corporate cash holdings. Empirical results show that the market value of cash holdings of financially constrained companies is significantly greater than that of financially unconstrained companies. Also, we investigate the impact of ultimate controlling shareholder on the market value of corporate cash holdings. Empirical results show that the market value of cash holdings of state-owned enterprises is significantly greater than that of natural persons and private enterprises. Finally, combining of the above analysis, it is suggested to improve and perfect the system of internal control, reduce information asymmetry and agency costs and increase business value.