Research On The Relationship Between Internal Control And Firm Technological Innovation

As an important corporate governance mechanism,internal control has been an heated topic for scholars to evaluate its effectiveness and economy.Sarbanes–Oxley Act includes strict provisions of internal control.It aims to cope with the accounting information distortion and supervise insider's fraud,providing a new idea for the evaluation of the effectivity of internal control and the regulation in corporate governance,and it has been to good results.Since then,it's necessary to build and gradually improve internal control system.In China,the basic norms of corporate internal control and a series of related supporting guidelines have been issued.It provides legal basis and effective guidance for a company to establish a perfect internal control system.The quality of internal control is directly related to every aspect of enterprise operation.Especially risk-evaluation,as one of the five elements of internal control,focuses on the risk factor within the whole company,and obviously decides the risk level.Technological innovation capability,on the one hand,is an important driving force for the economic growth of enterprises.On the other hand,technological innovation is a high-risk investment activity.Therefore,the research about the impact of internal control on technological innovation is of great significance for enterprises.Based on high-tech listed companies,agency cost is chosen to be a starting point in the paper.The paper integrates internal control,agency cost and technological innovation into a whole framework to explore the relationship among them.DIB-internal control index is chosen to measure the quality of internal control in paper.According to the organization control theoryand agency cost theory,the paper discusses the influence of internal control on managerial agency cost and corporate investment decision of technological innovation.At the same time,the theory of intermediary effect is introduced to make it clear about agency cost's intermediary role in the process of internal control to technological innovation.This paper finally reveals the internal control sensitively affects the technological innovation directly as well as indirectly through the mediating effect of agency cost.It uncovers the mysterious relationship between internal control and technological innovation,and enriches the theory of technological innovation.Through a series of studies,the main conclusions of this paper are as follows:firstly,among high-tech listed companies,there is apparent differences in the level of internal control setting and executing.And internal control and enterprise technology innovation have a significant "U" relationship,namely as the continuous improvement of the level of internal control,technological innovation will firstly increases and then decreases;Then the agency cost and the level of internal control have a negative correlation,namely the internal control level is higher,the agency cost is smaller;Finally,positive correlation is seen between the agency costs and technological innovation,namely with the increasing of agency cost,the level of technological innovation increases,and the agency cost plays a partial intermediary role between the effect of internal control on technological innovation.Based on above conclusions,it is practically significant to enhance internal control,improve technological innovation capability and enrich previous theoretical researches.