Marketization Process, Equity Structure And Effectiveness Of Internal Control

As an important aspect of modern enterprise system, internal control which is the essence of corporate governance structure can effectively prevent distortion of accounting information, and prevent significant financial fraud and risk, thereby it not only enhancing the reliability of financial information, but also increase the transparency of accounting information of listed companies.However, as China’s implementation of the internal control system not too long,and the institution and regulations related to internal control are not perfect, resulting in the current internal control of Chinese enterprises lack of supervision and internal constraint mechanism, the result of implementation of internal controlare unsatisfactory. Many researches prove that most of these problems are created by the internal and external factors of internal control. Therefore, it is important to investigate the factors of which impact the effectiveness of internal control. However, the existing researches mainly concentrate in the evaluation of internal control system effectiveness, disclosure of internal control deficiencies, and the economic consequences of internal control. Even though some literatures researched the factors of which impact the effectiveness of internal control, the discussed mostly limited to internal factors such as corporate governance, there is few literature from the internal and external environment to study the effectiveness of internal controls. So this paper researches the internal and external environment factors which affect the effectiveness of internal control.This article mainly research the impaction on internal control effectiveness from the enterprise region the marketization process of the external environment and from internal environment. The internal environment includs interactions of equity Nature and equity concentration, separation degree of two rights, stake of Executives and other factors of Equity structure. The article empirically analy the the influence of marketization process and ownership structure on internal control effectiveness From the perspective of internal and external, which sampled the two cities of Shenzhen and Shanghai A shares of quoted company data in 2006-2013, in order to Improving the effectiveness of internal control, further improving the related theory and providing reliable empirical evidence.After the related theory analysis, and based on actual data, the results show that:1、State-owned non-holding and non-state non-holding company’s internal control effectiveness is significantly higher than the state-owned holding company; State-owned holding company’s internal control effectiveness is significantly higher than non-state-owned holding companies. The study found that different shareholders on the company’s internal control effectiveness cannot treat as the same, the effect of equity must be taken into account comprehensively control situation and the characteristics of the shareholders, to determine the efficiency of equity governance of listed companies.2、The degree of the separation of control of ultimate controlling shareholder and cash flow right is significantly negative correlation with internal control effectiveness; At the same time, management eqiuty is significantly related to internal control effectiveness which show that equity incentive can ease the agency conflict in our country.3、The advancement of marketization can help to improve the effectiveness of internal control, and the correlation is more significant in the state-owned enterprises.4、The marketization can weaken negative influence on internal control effectiveness of the two rights separation degree, and strengthen the positive effect on internal control effectiveness of management equity.