Study On The Correlation Between Internal Control Information Disclosure And Earnings Quality Of Listed Companies

Recently, the positive effects of internal control and information disclosure playing on corporate governance and security markets have been generally recognized by the academia and practice. China has issued a series of policies and regulations on the improvement of internal control and information disclosure system of listed companies to enhance the effectiveness of internal control. Many experts have conducted intensive studies on economic consequence caused by internal control and information disclosure system of listed companies. The quality of earnings information has an important role on the economic efficiency and effects of listed companies. The earnings information announced by listed companies is the direct reflection of managements' accountability, an important reference standard for outside investors to evaluate the efficiency and effects of listed companies and an important basis for outside investors to make decisions. Therefore, earnings quality is the basis for outside investors to make investment decisions and determines the efficiency of market resource allocation to a large extent affecting the healthy development of security markets.This paper analyses the correlation between the quality of internal control information disclosure and earnings quality of listed companies of A-Shares in Shanghai Stock Exchange under the background of mandatory information disclosure. This paper tries to verify the significance of internal control information disclosure on the insurance of earnings quality, promotion of managements' accountability, reduction of risks caused by asymmetric information and strengthening corporate governance. Firstly, this paper introduces research backgrounds and significance and reviews the development of internal control emphasizing the importance of strengthening the internal control and information disclosure. Then, this paper summarizes domestic and international researches about the correlation between internal control, information disclosure and earnings quality giving an emphasis on the introduction of the correlation between internal control information disclosure and earnings quality. Afterwards, this paper elaborates theoretical basis of internal control, information disclosure and earnings quality which is reference signal theory, principal-agent theory, efficient market theory and corporate governance theory. After the related theoretic analysis, it has deduced the correlation between internal control information disclosure and earnings quality. Finally, with empirical analysis, this paper verifies the correlation between internal control information disclosure and earnings quality.Taking listed companies of Shanghai A-share from 2013 to 2014 as research object, this paper selects 1682 valid samples to verify relevant assumptions through descriptive analysis, correlation analysis and regression analysis. This study has found the significant correlation between the quality of internal control, internal control information disclosure and earnings quality. Namely, the higher the quality of internal control and information disclosure is, the higher the earnings quality of listed companies will be. Therefore, according to the results of this study, it provides suggestions for regulators, listed companies and outside investors specifically in order to improve earnings quality and corporate governance of listed companies, further promoting the healthy development of security markets.