An Empirical Study Of The Inhibition Role Of Internal Control On The Enterprise Inefficient Investment

Against the background of modern economy,the content of corporate financial management mainly consists of financing management,investment management,and profit distribution management.In which investment management helps enterprises increase future revenue and reduce risk by fund operations to achieve the maximization of both shareholders’wealth and corporate value.It is the core of enterprise financing. But severe inefficient investment problems among Chinese listed companies has appeared,including over-investment and under-investment,which negatively affect the efficiency of fund utilization of Chinese listed companies and the healthy development of capital market.Therefore,it has become an urgent task to research inefficient investment behavior of enterprises so that effectively instructs Chinese companies to make reasonable investment decisions.In this century, the occurrence of bankruptcy and collapse of a series of well-known enterprises at home and abroad has caused the world’s great attention to the enterprise internal control.Internal control also becomes the system construction strongly promoted by government regulation from a spontaneous governance mechanism.And which has increasingly become the hot topic of decision management and academic circles.Under the current background,hardly any literature offers the research of the correlations between internal control and the enterprise inefficient investment.Therefore, this article intends to adopt the method of empirical research, select the Shanghai A-share manufacturing listed companies from2009to2013as research samples, aims to reveal the inhibition mechanism of the internal control on the inefficiency of investment. In addition, the independent audit as external supervision and guarantee mechanism of corporate governance.Its purpose lies in restricting the opportunism behaviors of the company’s management, providing investors with confirmation of the third party of the relevant companies disclose reliability. And the independent audit makes disclosure of information more valuable by increasing the credibility of the financial statements in order to fully guarantee the effect of financial information in the contract and in the process of passing information to outside investors.In the use of its functions of supervision and the visa, the independent audit of high quality reduces the agent cost, which could optimize the company’s investment decisions.On the basis of the inhibition role of internal control on inefficient investment,the essay further examines whether the inhibition effect will present different sensitivity because of different audit quality.The article is altogether composed of five parts:The first part is the introduction. Which Summarizes selected topic background and significance of the paper, and reviews research literature of the internal control and the inefficient investment at home and abroad.Then puts forward the research ideas, innovations and research limitations in this paper.The second part are the related theories and hypotheses. In this section, first of all, the relevant concepts of the inefficiency of investment,audit quality and internal control are defined. Secondly, the paper states the theoretical analysis of the causes of inefficient investment, according to the role of internal control, theoretically analyzes its possibility of inhibitory effect on the inefficiency of investment behaviors, then puts forward the first two assumptions that the internal control has inhibitory effect on the inefficiency of investment behaviors (divided into overinvestment and underinvestment), the low level of internal control of the company is more likely to have the investment inefficiency. Finally, in view of the companies of different audit quality,the paper respectively investigates the influence degree of the internal control on investment inefficiency.The third part is the design before empirical study. Firstly,the section estimates the degree of enterprise over-investment (Over_Inv) and inadequate investment (Under_Inv) on the basis of Richardson (2006) model.Then by using estimated Over_Inv and Under_Inv as dependent variables which divide the entire capital market.The part makes multiple regression for internal control agent variables and a number of control variables.Lastly, it researches the inhibition of internal control on the investment inefficiency is due to the difference of audit quality or not and present a more obvious differences.The fourth part is about the empirical test and the result analysis. According to the qualified relevant data of Shanghai manufacturing listed companies from2009to2013, this part first carries on the descriptive statistics; Second, comparative analysis, by the investment inefficiency data detecting low internal control, high quality.And on the basis of internal control quality, the paper further divides enterprises of different audit quality,whether there is a significant difference for investment inefficiency; Finally,analyses the inhibition of internal control on the inefficiency of investment behavior by using the multivariate regression model.The fifth part is the empirical results and suggestions.The innovations of this paper is mainly manifested in the following:firstly, this paper takes the inefficient investment of enterprises as the breakthrough point,expands the research perspectives on the economic consequences of internal control; Secondly, this paper overcomes the defects of past research typically involving the excessive investment or insufficient investment,incomplete understanding of the definition of inefficient investment; Again, this paper also attempts to explore the inhibition impact of internal control on the inefficient investment which whether presents different sensitivity or not due to the difference of audit quality; Finally, this paper adopts data of recent five years (2009-2013) which is more timely compared with existing research results whose data from2009and2010.