The Correlation Between Characteristics Of Top Management Teams And Effectiveness Of Internal Control

Internal control is the foundation of the healthy development of the company. If the internal control of enterprises is effective, the loopholes of management of enterprises can be found and eliminated in time, the occurrence of mistakes can be prevented, the happening of the fraud motivation can be avoided, enterprise management is implemented smoothly and orderly. The effective internal control can help top management team to prevent and avoid enterprise risk in a timely. At the same time, the effective internal control can provide fundamental basis for internal and external audit and improve the reliability of enterprise financial reports. The effective internal control also can ensure enterprise behavior compliance with laws and regulations. Top management team as implementers of enterprise strategy and decision-making. They participate in enterprise management process and determine enterprise’s decision-making behavior choice. They control the company’s decision making and control. They are in charge of the whole company’organization and coordination. They affect the implementation of internal control, has the important influence to the enterprise’ internal control. At present, only some scholars analysis top management team’influence on internal control effectiveness from the perspective of corporate governance, this research analysis Characteristics of top management team’s influence on effectiveness of internal control on basis of the upper echelons theory, the problem of how to optimize the company’s senior management team can be solved, the problem of how to improve the level of internal control also can be solved, this research provide effective Suggestions to improve the effectiveness of internal control.This article is using the method combining the theoretical analysis and empirical test to analyze correlation between characteristics of top management teams and the effectiveness of internal control. This article firstly reviews domestic and foreign literature about the correlation between characteristics of top management teams and the effectiveness of internal control. On the basis of this, I put forward my own understanding and view, then determine the research emphasis. Secondly, this article analyze the authoritative literature and the related theoretical research. This article defines the relevant concepts:top management teams, characteristics of top management teams and the effectiveness of internal control. The measure of the effectiveness of internal control are summarized. Comprehensive evaluation of the strategic target index, the index of management goal, the financial report target index, the index of compliance objectives and asset security index is used to measure the effectiveness of internal control. Again, on the basis of upper echelons theory, the principal-agent theory and the stakeholder theory, we analyzed the relationship between characteristics of top management teams and internal control effectiveness. Then I analyzed how the average age of top management teams, the average education level of top management teams, the average tenure of top management teams and gender characteristics of top management teams affect the company’s internal control effectiveness. Then the article put forward the theoretical hypothesis:(1) The average age of top management teams is positively related to the effectiveness of internal control.(2) Top management teams’average education level is positively related to the effectiveness of internal control.(3) The average tenure of top management teams is positively related to the effectiveness of internal control.(4) Top management teams’ male ratio is negatively related to the effectiveness of internal control.According to the related theory analysis, this article make an empirical analysis to verify theoretical assumptions with the empirical data of listed companies, this article selects listed companies on the Shenzhen stock exchange and Shanghai stock exchange in2011as samples. This article choose the internal control effectiveness of company as the explained variable, with the average age of top management teams, top management teams’average education level, the average tenure of top management teams, top management teams’male ratio as explanatory variables, with the scale of the board of directors, senior management team size, executive pay, company size and asset-liability ratio as control variables, establish regression model, analyze correlation between characteristics of top management teams and the effectiveness of internal control, verify the proposed hypotheses. Finally, combining with empirical test results and theoretical analysis, this article put forward the conclusion of study, and put forward the corresponding policy recommendations, to higher to enhance internal control effectiveness. Pointed out the insufficient in research.This article’research conclusion is as follows:(1) Top management teams’average education level is positively related to the effectiveness of internal control. Shows that if the average education degree of enterprise’s senior management team is higher, the executives found problems, the ability of found problems, grasp and deal with the problem senior management team is better, the effectiveness of the enterprise’s internal control is higher.(2) The proportion of male of senior management team is negatively related to the effectiveness of internal control significantly. The proportion of female of senior management team is significantly positively related to internal control. Show that the increasing of female executives in the senior management team can effectively predict and control risks, improve the effectiveness of internal control.(3) The average tenure of top management teams is negatively related to the internal control effectiveness significantly. Suggests executives term time is not as long as possible. Short tenure sometimes is beneficial to the effectiveness of internal control.(4) The average age of the executives is positively related to the effectiveness of internal control, but not significant.Based on the above research conclusion, this article put forward the following Suggestions:(1) keep the rationality of age of the senior management team. We must ensure that the older managers and the experienced young managers join the senior management team. Make all kinds of social experience, management experience, value idea of different ages managers be combination advantage.(2) Enhance the overall level of education of the senior management team. Choose high educational background people as managers. Company should organize executive to study. Through the system of learning management knowledge and professional knowledge, to combine the theory and practice, the ability of team know and grasp the problems will be improved.(3) Keep the rationality of the tenure of the senior management team. Average tenure of the senior management team can neither too short nor too long. Company should not only guarantee the stability of the company senior management team, but also to avoid the tenure of the senior management team are rigid.(4) Improve the proportion of women senior management team. Companies should increase the proportion of female executives consciously, pay attention to the advice of female executives, consider female executives of innovative and consider constructive Suggestions female executives.