Research On The Relationship Between Internal Control Quality And Working Capital Management And The Moderating Effect Of Corporate Governance

One important goal of internal control is to ensure the efficiency of financial reporting reliability and the company’s operation. Internal control is the fundamental guarantee for effective management and future development of an enterprise. Working capital management is an important content of corporate financial decision. It has direct impact on companies’ operating cost and competitiveness. Improper working capital management will affect the company’s cash flow, ability of paying debt and credibility of the company, and even leads to the failure of the company. Therefore, effective working capital management plays an important role in enterprise operation. Research has confirmed that the strengthening of operation management efficiency has a positive effect on enterprise performance. Therefore, this paper will study how to improve the working capital management efficiency from the perspective of internal control.Using data from 2008 to 2014 of listed companies of Shenzhen and Shanghai Stock Exchange as sample, we use the disclosure of internal control attestation report as a proxy for internal control quality to explore the influence of internal control quality on working capital management, and the moderating effect of corporate governance on the relationship of the internal control quality and working capital management. We find that, improvement of internal control quality is good for the efficiency of working capital management, and when internal control quality is good, working capital management efficiency will be high; and corporate governance has a positive moderating effect on the relationship between internal control quality and working capital management, and when the internal control quality is fixed, the better corporate governance is, the higher level of working capital management performance there will be.This paper not only provides the guidance to the promotion of internal control system construction and the improvement of the internal control quality, but also provides a reference for the listed companies to improve the efficiency of working capital management. Companies can improve the internal control quality and fulfill the internal control system in order to improve the working capital management efficiency.