Disclosure Of Internal Control Defects Of Market Reaction Research

Internal control defects refer to the design or operation of internal control is not reasonable or not possible, causing big errors for managers and employees to prevent and correct them in time. Internal control defects are directly related to the effectiveness of internal control, so internal control defects are the most contented of a class of internal control information. The disclosure of internal control defects plaies a key role in reducing the information asymmetry, improving the efficiency of investors decision-making, and perfecting the internal control system and so on. In “The enterprise internal control basic norms” in our country puts forward the specific requirements for the disclosure of internal control defects. So what about the disclosure of internal control defects at present in our country, and what effect does it have to investors and how to influence.These questions are the focus of this article. Due to the defects of internal control information are often released with annual report at the same time,so how to avoid the influence of the annual report disclosure in research is the key and difficulty of the research.This article follows the theoretical analysis---empirical research---policy suggestions of research way. First of all, this article defines the disclosure of internal control defects related concepts, then analyzes the investor’s ability to capture and use of internal control defects using the analysis framework of information economics and the principal-agent theory. The second, this article selects the Shanghai a-share 2735 listed companies as sample from 2012 to 2014, in combination with the system background of the disclosure of internal control defects in our country, and analysis statistically the present situation of the defects of internal control disclosure of listed companies. In empirical study, this paper uses event study method, setting disclosure internal control defects on the same day as the announcement day, sets five days prior and after to the announcement as A window, uses cumulative excess yields to measure the market reaction, sets the Shanghai a-share companies of disclosing internalcontrol defects(2012-2014) as A sample group, and selects the control group meeting the condition with failure to disclose internal control defects and in the same industry similar financial conditions with the sample group, and internal control audit report is A standard, finally chooses 374 pairs sample size.Through the analysis of the trend diagram of comparison sample group and the control group and the mean inspection,found that: 1) the disclosure of internal control defects produced negative market reaction; 2) the sample group have a poorer market reaction than the control group. In order to guarantee validity of the above conclusion and eliminate interference of the annual report information to the research conclusion, this article sets the accumulated excess yield as the dependent variable, the disclosure of internal control defects as the independent variables, sets earnings quality, the types of audit reports, company size and company growth as the control variables, and establishes the multiple regression model. The empirical results show that the disclosure of internal control defets has a significant negative market reaction indeedly.The innovation of this article seizes the most contented information-----disclosure of internal control defects of internal control information, and introduces the control group and multiple regression analysis in the study, avoiding the interference of the annual report information, improving the rigour of the study, and hoping a breakthrough on the research perspectives and research methods.