Impact On Corporate Internal Controls Over Investment

As the main micro-body of the community, enterprises’investment efficiency will affect its operating results, the ability to choose to invest in worthy projects will determine whether the sustained and healthy development of enterprises. From a macro point of view, to promote investment in Chinese economic growth as one of the troika of China’s macroeconomic sustainability also plays a decisive role. In recent years, different degrees of certain industries and regions has been overcapacity, irrational industrial structure, as well as "over-investment" phenomenon, the performance of redundant construction, fixed asset investment growth is too fast, low efficiency and other issues. How to curb excessive investment behavior, and improve investment efficiency of enterprises in China’s economic development has become an urgent problem. Over-investment enterprise is an enterprise manager will invest in the NPV is negative free cash flow of the project. In the reality of the capital market environment, due to the principal-agent problem caused by the modern enterprise system and information asymmetry problem, the business is essentially difficult to achieve optimal investment size under perfect capital markets, and therefore the case in over-investment.At the same time, since the United States enacted the Sarbanes-Oxley Act of 2001 (SOX) since internal control is becoming the focus of attention of the world. Chinese Ministry of Finance, the Commission, the Audit Commission, China Banking Regulatory Commission and China Insurance Regulatory Commission issued the five ministries, respectively, in 2008 and 2010, "the basic norms of internal control," "Enterprise Internal Control Guidelines", marking the initial establishment of our internal control system specification. Among them, one of the targets of internal control is to achieve operating efficiency and operating results, which is part of the economic consequences of the internal control areas. Research in recent years about the economic consequences of internal control, internal control and corporate issues increasingly inefficient investment concern, but there are differences in methods and conclusions of the study. Based on this, refer to the existing research results, combined with Chinese actual situation, analyze the internal control of the listed company’s influence over the investment. In addition, based on the enterprise life cycle theory, there are differences in different stages of development agency problems facing businesses and the information asymmetry problem, then explain the different motives and extent of the formation of excessive investment, then the impact on internal controls over investment whether there are differences, In this paper, have also been analyzed.Specifically, we use a combination of theoretical and empirical analysis method to study the impact on internal control over investment:First describes the background, research questions, research objectives and research ideas and methods, etc.; and research literatures were reviewed; Secondly, the text of the important concepts were defined, and were on the principal-agent theory, the information is not symmetry theory and life-cycle theory of the three theories of the sort and forth, and on this basis a theoretical analysis of the internal control and that were the principal-agent problems caused by excessive investment, internal control and information asymmetry caused by excessive impact on investment over the life cycle of investment and internal controls under a detailed analysis, combined with China’s actual situation raises two hypotheses of this article. Again, the use of collected Shenzhen A-share listed companies in the manufacturing-related data for 2010-2013, based on the assumption that the overall internal controls and corporate life cycle based on assumptions made empirical research were completed preliminary test data descriptive statistics and correlation analysis, and regression model established for the overall sample regression analysis and regression analysis grouping.Through empirical testing, we draw the following conclusions:our Shenzhen A-share listed companies manufacturing the more common over-investment behavior; the level of investment and the level of internal control over the degree was a significant negative correlation, that is a good internal control over corporate investment inhibited, this result means the current regulatory agencies to strengthen internal control decisions construction helps protect the interests of investors are; excessive over-investment in listed companies in addition to the impact of the level of internal control, but also by the growth opportunities, company size, free cash flow, assets significantly affect the debt ratio; when the basis of the life cycle theory, the enterprises in the growth and maturity, affecting the level of internal control over investment is significant, while in recession, the impact on internal controls over investment is not significant, illustrates the different stages of the development of enterprises, the impact on internal controls over investment differences.Finally, Combined with the conclusions of this paper, made three specific recommendations, and analyzes the shortcomings of this study, and proposed further research prospects.