Mediating Effect Of Internal Control On The Corporate Governance And Earnings Quality- Data From Listed Manufacture Companies Of A-share In Shanghai Stock Market

As a comprehensive index of the corporate performance,the accounting earnings are widely concerned by stakeholders.The existing research results show that:the corporate governance plays an important role in improving the quality of earnings,with the improvement of corporate governance,the earnings quality will be improved.Besides,listed companies are required to establish an internal control system which can work effectively,for the purpose of ensuring the quality of financ ial reports and related information.The Basic Norms of Internal Control points out:as the basis of implementing internal control,the internal environment contains an important factor,that is internal governance structure.Thus,corporate governance restricts the effectiveness of internal control,whose purpose is ensuring the authentic ity and reliability of financial reports,there are inner connection among corporate governance,interna-l control and earnings quality.Based on it,this paper introduces the theory of mediating effect,research on the mediating effect of internal control on corporate governance and earnings quality.We hope that our research can provide reference for listed companies,and ultimately improving the quality of earnings.Firstly, on the guidance of relevant basic theory, which include the theory of principal-agent, incomplete contract, asymmetric information and signalling, we study the existing research. Then, we define the concept of corporate governance and earnings quality of this paper, and we put forward the relationship among corporate governance, earnings quality and internal control, meanwhile, we introduce the theory of mediating effect to analyze the mediating effect of internal control in the process of corporate governance affects earings quality. After putting forward the relevant hypothesis, we select the listed manufacture companies of A-share in shanghai stock market as the study sample, collect the relevant data from 2012 to 2014.As for the measure method of variables, we consider the characteristics of ownership structure, board of directors, board of supervisors and managers, and set 9 indexes as the substitution variables of corporate governance according the characteristics, and we calculating the ICQ as the substitution variable of internal control by measure the realization of the goal of strategy, management, compliance and report, meanwhile, from the perspective of earnings management, we calculate the discretionary accruals(DA) as the substitution variable of earnings quality, then, the research models are constructed.During the process of empirical analys is, descriptive statistics are conducted for that we can know some details of our samples, correlation analys is are conducted for that we can verify the correlation of variables preliminarily, finally, we conduct the OLS multiple regression analys is and test the mediating effect of internal control according to the procedure of mediating effect test. The empirical results show that, for the A-share manufacturing listed companies in shanghai stock market, the internal control has mediating effect on the relationship of 4 substitution variables and earnings quality, the 4 substitution variables are controlling shareholder’s nature, the concentration of ownership, the size of the board of directors and CEO holdings. Further analysis found that, as for the sample firms, if the following 5 substitution variables of corporate governance can significantly affect earnings quality, the mediating of internal control can be confirmed further. This result also indicates that, for the listed manufacture companies of A-share in shanghai stock market, they do need to enhance the corporate governance, so that, it can really improve the quality of earnings.Finally, we summarize the conclusion of our research, and put forward some suggestions based on the governance mechanism and the med iating effect of internal control. Meanwhile, we point out the deficiencies of our study, and give some possible directions for following study.