Research On The Impact Of Internal Control Deficiencies Disclosure On Debt Financing

Internal control information as an important supplement of enterprise financial information,its disclosure allows investors to understand the implementation of internal control system and judge for the authenticity and reliability of financial information,so it can be an effective way to alleviate the information asymmetry and safeguard the interests of outside investors.Since 2012,our country presented clear requirements that the companies which list on the Shanghai or Shenzhen main board need to disclose the self assessment about the internal control to evaluate the effectiveness of internal control system and reveal the deficiencies of internal control.This marks the internal control information disclosure of listed companies in our country has already entered the stage of mandatory disclosure from voluntary disclosure period.The paper bases on the background of the mandatory disclosure,studies the impact of internal control deficiencies disclosure on debt financing.In the same time,further studies on how deficiencies severity and the reliability of the disclosure effect on the debt financing.The study not only enriches the research on the disclosure of internal control information and the protection of creditors,but also tests the effect of mandatory disclosure of internal control information,so it has important theoretical and practical significance.The paper firstly analyzes the relationship between disclosure of internal control deficiencies and debt financing combined with the related theory and the current situation of our country's internal control information disclosure.Then in order to study how the disclosure of the internal control deficiencies effect on the availability of debt financing and debt financing costs,takes the listed companies which disclosed the internal control deficiencies between 2012 and 2014 and their matching companies as research samples and uses the statistical software STATA to build models and proceed the empirical research.At the same time,contrastive analysis according to the severity of the internal control deficiencies and the authenticity of companies which disclosed no internal control deficiencies to study how different disclosure characteristics effect on debt financing and verify whether the difference is significant or not.The conclusions are as follows:(1)It is harder to obtain bank debt financing and the costs of debt financing is much higher if enterprises disclose internal control deficiencies in self assessments reports which shows that the disclosure of internal control deficiencies dramatically affects the debt investors' decisions and then the corporate debt financing under the background of mandatory disclosure.(2)The severity of internal control deficiencies has no significant effect on debt financing,this result shows the quality of information about the severity of enterprise internal control deficiencies is poor so it unable to play a role in signal transmission.(3)The authenticity of information disclosure of internal control has a certain influence on debt financing which mainly on the availability of debt financing.This shows that the debt investors can identify whether the companies have internal control deficiencies or not in a certain extent and impose a debt financing constraint on the company which concealed internal control deficiencies.