Empirical Research On The Relationship Between Disclosure Of Internal Control Information And Corporate Performance

The internal control is not only a way to ensure the normal operation of the enterprise but also an effective mean to achieve effective business objectives. At the same time, the information disclosing is a very important way to improve the transparency of corporate information and to strengthen market supervision. The disclosing of internal control information in the enterprise gradually became a hot topic of the experts and scholars in recent years. The disclosing of internal control information in our hometown is also gradually becoming more and more standardized and matured. Enterprise Internal Control Evaluation Guidelines formally implemented in both domestic and overseas listed companies since January 1,2011. It not only reregulated the contents and procedure of listed companies’self-assessment report, emphasized the comprehensiveness, objectivity and importance of internal controls, but also required a third-party audit report of the disclosure of internal control of the enterprise since the Shanghai Stock Exchange and the Shenzhen Stock Exchange claimed that the enterprises’audit report of internal control should be mandatory disclosure in January 1,2012. We may wonder that whether the effectiveness of the internal control disclosure of information really improved the operational risks of listed companies has been substantially controlled after the releasing of the guidelines. We should pay our attention on cost-benefit based considerations if companies will proactively disclose internal control related information and implement the relevant provisions of the policy. In this paper, as the releasing of the new guidelines we try to do a case study research for the guidelines release, in order to explore the relationship of the internal control information disclosure and operational risks-, costs related to management and business performance,Firstly, I construct enterprise performance evaluation system by factor analysis and calculate the complex score of the business performance of the company. In addition, I use the score as the behalf of business performance. Secondly, based on the results of previous studies, accessed the sample company’s financial reports and audit reports, analyzed the China’s listed companies in today’s internal control information disclosure and based on the combination of internal control disclosure of information to achieve the goal, I build an index of internal control information disclosure which to illustrate the level of internal control disclosure of information. Through setting the size of the company, accounting for independent directors, ownership concentration, equity restriction and asset-liability ratio as control variables, I studied the relationship between internal control information disclosure and business performance.The results showed that firstly the relationship between the perfection and accuracy of the company’s internal control information disclosure and the business performance is a positive correlation. Secondly, except controlling the growth of agency costs, bringing a good market expectation, the mandatory disclosure policy can also enhance the market value of the business. Thirdly, by using enterprise ROE, return on total assets, earnings per share as an alternative business performance variables robustness test, I prove that positive correlation between the internal control information disclosure and corporate business performance does exist. And this paper also show that information disclosure of internal control improve the level of effective control of the agency costs and improve business performance. Finally, this study have a certain reference value for drawing up policies, contributing for internal control information disclosure controlling costs and quality, strengthening the supervision of third-party audits.