Research On The Impact Of Institutional Investors' Shareholding On The Quality Of Internal Control

With the rapid development of Chinese enterprises,various risks in shadow have been increasingly revealed.The cases of accounting falsehood,financial fraud,illegal behavior,economic crimes,business failure and bankruptcy often occur due to the lack of internal control.Internal control system is the foundation for an enterprise to establish the modern management system.It is also the security measures of enterprises' existence,development and meeting the profit targets.Therefore,how to improve the quality of internal control is an important point.Institutional investors are playing an important role in the capital market.Compared to individual investors,they have affluent funding,advanced information and professional ability.After institutional investors become shareholders,they will actively take part in the corporate governance.This action is called shareholder activism of the institutional investors.Some studies have shown that institutional investors have been actively taking part in the corporate governance and thus having positive influences on the operating performance and the values of companies.Based on the significance of internal control in the corporate governance,this paper studies the impact of institutional investors' shareholding on internal control quality,in order to enrich the empirical study of institutional investors and internal control quality.This paper also studies different institutional investors and their different effects of governance.This paper is the study on the impact of institutional investors' shareholding on internal control quality.The main conclusions are as follows:(1)Increasing the share proportions of institutional investors is helpful to improve the internal control quality.A certain proportions of institutional investors' shareholding is the premise of this effect.(2)This effect mainly results from the governance structure and operational control.(3)General legal person and securities investment funds are the main parts of improving the internal control quality.They enhance the design and implementation of internal control by participating in corporate governance.(4)Increasing the share proportions of institutional investors is useful to achieve the objectives of internal control,including improving management level,enhancing the reliability of financial statements,and reducing illegal behaviors.Finally,this paper gives some suggestions about the effect of institutional investors according to the research and analysis.