Chairman-CEO Power Differential?Overconfidence And The Quality Of Internal Control

Since Enron?WorldCom and other companies have been disclosed a series of accouting scandals,people realized that an effective internal control is crucial to prevent occurrence of such incidents.The government regulatory agencies and company pay more attention on the construction of internal control.Management plays a central role in the process of internal control construction,which has an important influence on the establishment,implementation and supervision of internal control.The existing literature shows that there is a correlation between the managerial power,managerial overconfidence and internal control.In view of this,this paper bases on agency theory and managerial power theory,using the data of A-share listed companies of China from 2009 to 2015 to research the relationship between Chairman-CEO Power Differential and internal control,and further investigate how the CEO Overconfidence influence the relationship between Chairman-CEO Power Differential and internal control.The results show that:(1)there is a significant positive correlation between Chairman-CEO Power Differential and internal control.(2)CEO Overconfidence has a significant negative impact on the quality of internal control.(3)the overconfidence of executives will weaken the positive effect of the Chairman-CEO Power Differential on internal control.The results of this study provide a reference for how to improve the internal control of listed companies through power allocation.Chairman and CEO of power as the core structure of listed companies,the power gap between the two is helpful to promote the implementation of internal control efficiency.Therefore,in the process of internal control the enterprise should be reasonable allocation of the power of the chairman and CEO.