A Study Upon The Influence Of Internal Control Material Defects On Debt Capital Cost

Since the internal containment theory was put forward in 1912,the enterprise internal control system has become more and more important in regulating the daily operation and protecting the interests of investors.United States Congress passed the Sarbanes-Oxley Act in July 2002,to strengthen the disclosure of information,and to restore investor confidence in the capital markets.Our country also have issued a series of laws and regulations in order to Construct the internal control standard system.They all mean that internal control has great influence on improving enterprise quality,protecting investors and regulating the capital market.And in how to solve the problem of corporate finance,the internal control also has its own set of operational mechanism.On the one hand,high quality internal control can reduce the information asymmetry of the creditors and the debtors,the debtors provide true and useful informations to the creditors.On the other hand,high quality internal control helps enterprises become stronger,it can help enterprises to improve profitability,good profit can reduce the risk of creditors and help enterprises win low cost the funds,to achieve sustainable development of the enterprise.At present,China enterprises are facing financing difficulties,and creditors not easily lend funds because of the high risk,capital supply and demand can not balance.Especially in the country put forward to revitalize manufacturing,how to help the enterprise obtain funds for development at the same time to reduce the risk of creditors,improving enterprise internal control quality is a good solution.At the same time,it is also necessary to consider whether the impact of financial reform will affect the relationship between internal control and corporate debt capital cost.And,the nature of property rights must be considered in the study.This article adopts the way of combining theoretical analysis and empirical research.First,review and summary of literatures at home and abroad,from the aspects of internal control material weaknesses,the cost of debt capital and the relationship between internal control material weaknesses and the cost of debt capital.Then the article puts forward the research hypothesis based on the principal-agent theory,the information asymmetry theory,the signal transfer theory,the corporate governance theory and the stakeholder theory etc.This article selects China's A share listed companies in manufacturing Industry in years 2011-2015 as the research samples,and build an empirical model to explore the impact of internal control material weaknesses on the cost of debt capital.The study found that when the enterprise has material weaknesses,the creditors will improve the risk rating of the enterprise,the debtor has to pay a higher debt capital cost.And this relationship in the enterprise in the lower financial reform deepening area will be weakened,it means the help of improving the quality of internal control to obtain the low cost of debt financing is relatively smaller,in financial reform deepening low areas.At the same time,because of the existence of the Soft Budget Constraint,the creditors prefer state-owned enterprises,the help is relatively small for internal control to enhance the low debt capital cost of state-owned enterprises.