The Impact Of Internal Control Defects Disclosure In Listed Companies On Market Reaction

As the internal control information has been disclosed compulsorily in mandatory stage, to make clear that how the internal control defects disclosure influence its market reaction is terrific important for listed companies keeping sustainable development and the regulators making decisions. So we focus on the internal control defects from internal control information report and systematically investigate the impacts of the type and status as well as degree of internal control defects disclosure in listed companies on market reaction in this paper.First and foremost, we investigates the impact of type of internal control defects disclosure in listed companies on market reaction theoretically, based on which, the regulating action of internal control audit opinions between the type of internal control defects disclosure and the market reaction is analyzed theoretically. Furthermore, the impacts of the status and degree of internal control defects disclosure are discussed in theory. At last 542 listed companies in Shanghai and Shenzhen A share market are selected as the samples. Then the assumptions about the impacts of the type and status as well as degree of internal control defects disclosure in listed companies on the market reaction are tested by empirical data.The main conclusions and potential contributions in this paper as follows:(1) In terms of the type of internal control defects disclosure, the market reaction is negatively influenced by type of internal control defects disclosure significantly. Contrasting that the listed companies of which the type of internal control defects disclosure is non-defective will gain a better market reaction, the listed companies of which the type of internal control defects disclosure is defective will gain a worse market reaction. Based on the regulating action of internal control audit opinions, the market reaction is negatively influenced by type of internal control defects disclosure significantly. As internal control audit opinions plays a significant regulating role, the extent of which the market reaction is affected by the type of internal control defects disclosure has been enhanced significantly.(2) In terms of the status of internal control defects disclosure, the market reaction is negatively influenced by status of internal control defects disclosure insignificantly. There is not significant distinction about the market reaction between the listed companies of which the status of internal control defects disclosure is normal defection and the listed companies of which the status of internal control defects disclosure is non-defection. When the listed companies disclose normal defection, the information will have a little affection on the market reaction.(3)In terms of the degree of internal control defects disclosure, the market reaction is positively influenced by degree of internal control defects disclosure insignificantly. There is not significant distinction about the market reaction between the listed companies of which the degree of internal control defects disclosure is detail disclosure and the listed companies of which the degree of internal control defects disclosure is non-detail disclosure. At present, to disclose the internal control defects more detailed is not enough to improve the market reaction.