CEO’s Reputation, Internal Controls And Enterprise’s Commercial Credit Financing

Commercial credit financing widely exists in every parts of the trade between enterprises and trade partners upstream and downstream(suppliers and clients). Account payable, note payable and deposit received in financial information are all the embodiments of enterprises’ using commercial credit financing. China is experiencing the crucial year of comprehensively deepening reform, so the pressure on economic downturn is increasing, enterprises’ s operating is more difficult, traditional financing ways still have limits and disadvantages and the financial system, and the capital market have remained to be completed and perfected. Under such a background, it has been an essential part for keeping competitive advantages and promoting a long-term development of enterprises to grasp and use the commercial credit financing.CEO is known as the enterprise’s spokesman whose reputation has a great influence on enterprise’s reputation. Because of the factor of “information asymmetry”, providers of commercial credit should not only investigate enterprise’ s financial information, but also make decisions of commercial credit financial according to the non-financial information conveyed to the outside by enterprise. As one of the main signals the enterprise convey to the outside, CEO’s reputation is greatly related to enterprise’s ability of gaining commercial credit financing. Besides, enterprise’s internal controls play a confidential role in the daily trade with suppliers. As the effectiveness of enterprise’s internal controls constantly increase, suppliers will trust the enterprise more. Thus the effectiveness of internal controls is also closely related to enterprise’s ability of gaining commercial credit financing.The relationship among CEO’s reputation, internal controls and enterprise’s commercial credit financing are mainly studied in this paper. Firstly the relevant theories and studying achievements about CEO’ s reputation, internal controls and enterprises’ s commercial are combing, based on which, using the A-share companies listed from 2011 to 2013 in the stock markets of Shanghai and Shenzhen as samples, build a model to empirically tested the relationship among CEO’s reputation, internal controls and commercial credit financing, and then find that CEO’ s reputation is significantly and positively correlated to enterprises’ s commercial credit financing. The further study discovers that in developed regions, CEO’ s reputation has a limited influence on enterprise’ s commercial credit financing, while in non-developed regions, CEO’ s reputation has a significant and positive effect on enterprise’ s commercial credit financing. Except that, the effectiveness of enterprise’s internal controls has a negative effect during CEO’s reputation act on enterprise’s commercial financing. It suggests that when suppliers make decisions about commercial credit, what they should highly consider about are enterprises themselves. With the improvement of the effectiveness of internal controls, the effect of CEO’s reputation on enterprise’s commercial credit financing will decrease. Finally, the study conclusion is drawn, and for which some suggestions are proposed. At the same time, some disadvantages and expectations of the study are referred.