Empirical Research On The Influence Between The Effectiveness Of Internal Control And EVA Of State-owned Listed Companies

In comparison with other companies, the principal-agent problem incurred by the separation of ownership and management stands out more in stated-owned key enterprises.To earnestly fulfill the duties of investors of state-owned assets, and to accomplish the preservation and increase of value for the state property, SASAC has been fully implementing the EVA performance appraisal method since January 1st, 2010, in which EVA plays an important role as one of the key indicators. And the EVA-oriented value management system has been gradually formed and promoted ever since.Along with the reform and development of the value-orientation of performance evaluation among central enterprises in China, the construction and perfection of internal control system also speed up the pace. An effective internal control system can ensure the smooth and orderly conduct of business. Internal control, as an important system arrangement and management tool, ultimately serves to maximize the enterprise value.In this paper, first of all, we summarized the literature review and the relationship between internal control and EVA based on previous research results. Then we emphatically introduced the connotation and measurement method of the effectiveness of internal control and EVA respectively. The correlation between the effectiveness of internal control and EVA has been discussed, and we further analyzed the influence of internal control effectiveness on the value creation process of EVA. Next, we applied empirical analysis to explore the inner link between the effectiveness of internal control and EVA,using the data of China’s state-owned listed companies during 2009-2013. The results showed that the effectiveness of internal control presented a significant positive correlation to EVA. An effective internal control can exert a positive impact on the corporate’s growing potential, profitability, cost control ability and the level of operational efficiency of assets, while put somehow impact on the decision-making of capital structure, thus enhance the economic value creation of the enterprise as a whole. Based on the above conclusions, we further put forward some suggestions of practical significance to improve EVA and promote the sustainable development for central enterprises under EVA-oriented performance goals from the perspective of internal control. At the end of this paper, the shortcomings and defects in this paper were summarized.