Free Cash Flow?Internal Control And Corporate R&D Investment

With the development of The Times,the competition between enterprises is becoming fiercer.The competitio of enterprises is manifested in many aspects,one of which is research and development.But at present,the level and efficiency of r&d investment are far below the world average.How to improve the research and development ability and level of the enterprise is a question that researchers are thinking about.From the characteristics of research and development.Research and development requires a lot of money.But due to the financing constraints and the nature of research and development,it is difficult to abtain funds outside.So research and development activities has a strong dependence for free cash flow of the enterprise.Based on this,this article through empirical research to verify the influence of free cash flow to the enterprise research and development.A series of financial fraud scandals of listed companies make people have to pay attention to the internal control defects of enterprises.The implementation of the internal control system will have great value to the enterprise.High quality internal control can improve the quality of accruals,reduce the management level of earnings,improve financial reporting robustness,reduce financing costs and reduce audit fees.High-quality internal control can make information more accurate and transparent.More transparent information disclosure,and strictly control in the process of examination and approval of investment projects,can prevent management from using the funds for negative equity projects and promote management to fund projects that would benefit the development of the enterprise.Therefore,this paper explores its influence on the relationship between free cash flow and enterprise r&d level from the perspective of internal control.There are not many researches on this thesis.In previous researches of the relationship between free cash flow and investment,mostly are the study of the relationship between free cash flow and short-term investments,free cash flow leads to excessive investment or the problem of insufficient investment,but there are few articles research free cash flow to the enterprise r&d investment.Existing research shows that the implementation of the internal control system can bring great value to enterprises,including reducing the earnings management level,lowering financing costs and auditing expenses.The empirical test shows that the free cash flow and internal control quality of enterprises are positively proportional to the level of r&d investment.In addition,the quality of internal control will promote the positive effect of free cash flow on the r&d level of enterprises.The conclusion is confirmed by a series of robustness tests.At present,the research on the influence of internal control quality is still abundant.This paper studies the role of internal control in research and development and the adjustment between free cash flow and research and development.On the one hand,enrich the effect of internal control in theory and the factors that influence the development level and on the other hand,it provides reference for further promote the implementation of the internal control system and improve the level of r&d investment.