Study On The Effect Of The Ownership Structure On Effectiveness Of Internal Control

With economic globalization, modern business transactions are increasingly complex.Internal control is more important to enterprise management. It measures the managementlevel of modern enterprises and assures the sustainable development of enterprises. Effectiveinternal control can block up the holes of enterprise’s management, prevent mistakes,corruption motivation and enterprise risk. And it can help to keep management stable andorderly, provide basis and foundation for internal and external auditing. Internal control is theescort of enterprise’s management， finally service in the objectives of enterprises tomaximize their value. The internal control system cannot exist alone, it grows and perfectswith the corporate governance. Corporate governance is the foundation and guarantee tointernal control, effective internal control can improve the internal management mechanismand guarantee stakeholder interests. And shareholding structure, as the property rightsfoundation of corporate governance, has direct affect to the efficiency of elements. it alsoaffects the internal control system that is formulated scientifically and implementedeffectively or not. So, The ownership structure is closely related to the effectiveness ofinternal control.This paper mainly discussed how the ownership structure to affect the efficiency ofinternal control with16listed commercial banks in China as a sample, mainly divided intothree parts of the theoretical analysis, industry analysis, as well as case studies. First, itexpounded the theory of the ownership structure and corporate governance. And inaccordance with the logic route of shareholding structure-corporate governance-internalcontrol, it analyzed the mechanism of action between the ownership structure and theeffectiveness of internal control from a theoretical point of view. Second, it analyzed industrycharacteristics of China’s16listed commercial banks in line，including statistical analysis ofthe characteristics of this stage of listed commercial banks equity structure from two aspectsof equity concentration and nature of equity, relevant provisions of the internal control ofcommercial banks by relevant regulatory authorities, and the development status of China’scommercial banks’ internal control. Third, it selected four commercial banks, China CITICBank, China Merchants Bank, SPD Bank, Minsheng Bank, from China’s16listed commercial banks, as the samples of case study. By comparing their shareholding structure, theachievement condition of internal control objectives and disclosure and audit of internalcontrol self-assessment report in three years of2009-2011, it concluded that to maintain arelative concentrated ownership and proper ownership balance is helpful to improve thevalidity of internal control, and the first majority shareholder which is non-state has noincremental value to the effectiveness of internal control. Last, based on the study results, thispaper proposed corresponding recommendations of improving the effectiveness of internalcontrol for the public commercial banks of china.