Research On The Relationship Among Effectiveness Of Internal Control, Equity Restriction And Corporate Performance

Frequent financial fraud cases in domestic and foreign capital markets force people to pay close attention to enterprise internal controls. "Sarbanes-Oxley Act" enacted by the United States in 2002 and "Enterprise Internal Control Basic Norms" issues by China in 2008 and some other bills proposed by different country show that all governments attach great importance to the development of enterprise internal controls, which make the enterprise internal controls become the focus in the academia and business circles.Enterprise internal controls are made to improve the corporate performance. Theoretical research has found that the unreasonable corporate governance mechanism is an important cause of the poor performance and the ownership structure is the core of corporate governance. In China, the ownership concentration dominated by major shareholders is one of the basic characteristics of ownership structure of listed companies, which provides convenience for the controlling shareholder to seek personal gain and inroad the interest of minority shareholders. Equity restriction runs the public company by sharing the control rights, which can contain the expropriate behavior of the controlling shareholder and relieve the agent problem between the shareholders effectively.Based on the relevant research, this article analyses the relationship among the effectiveness of internal control, the equity restriction ratio and the corporate performance with the principal-agent theory, asymmetric information theory and signaling theory, meanwhile, we also explore the mediating effect of internal control in order to seek the governance mechanism to improve corporate performance. We select the public companies from 2011 to 2014 as the research object for this empirical study and the regression results support the hypothesis that we have come up with. In the end, we have drawn the following conclusion:(1) the equity restriction ratio is higher, the company performance is better; (2) the equity restriction ratio is higher, the internal control is more effective; (3) the internal control is more effective, the company performance is better; (4) there is mediating effect between the effectiveness of internal control and the equity restriction ratio. Finally, based on the empirical analysis, we make some targeted suggestions to build reasonable management mechanism and improve the corporate performance.