Political Connection,Internal Control Quality And Cost Of Credit Financing

In the past 40 years since reform and opening up,private economic development has made great achievements and has become an important force to promote sustained and healthy economic development.However,the difficulty of financing and financing restrict the development of private economy.The world bank investment environment survey shows that China is the most serious financial constraint in the 80 samples,of which 80%of the private enterprises believe that financing constraints impede the development of enterprises.As an important external financing means,credit financing has been favored by many private enterprises because of its advantages of fast acquisition,high flexibility,low financing cost,and no change in the right to control enterprises.Accounting information is an important basis for deciding the specific terms of debt contracts,which will affect credit decisions of credit institutions.There are many factors that affect the reliability and robustness of accounting information,and the quality of internal control is one of the key factors.Establishing a sound internal control system and implementing effective internal control measures will help to improve the quality of accounting information.Therefore,whether we can improve the quality of internal control and reduce the credit financing of enterprises is very much concerned by private enterprises.As our country is still in the period of the transition from the administrative allocation to the market allocation mode,the private enterprises are facing more serious credit discrimination.In order to weaken the influence of such credit discrimination,enterprises have the motive to establish political connection with the government.From the debt contract,this paper studies the influence of the quality of internal control on the cost of credit financing and the change of the influence under the different political connections.Based on the existing literature,this paper analyzes the influence of internal control quality on the cost of credit financing from the information asymmetry theory,signal transmission theory,principal-agent theory and rent-seeking theory,as well as the regulation effect of the political relevance in it,and the number of two private A shares listed companies in Shanghai and Shenzhen in China for 2012-2016 years.The empirical test is carried out for the research sample.The empirical results show that high quality internal control can reduce the cost of credit financing by reducing the information asymmetry between enterprises and credit institutions and alleviating the conflict between the two sides of credit.Political relevance can significantly reduce the impact of internal control quality on the cost of credit financing,that is,the impact of internal control quality on the cost of credit financing is more obvious in the non political group.The further group test found that the regulatory effect of political relevance is more significant in the low internal control quality group,indicating that the relationship between the internal control quality and the credit financing cost is weakened mainly through the "indirect resource effect" and "information effect".This paper discusses the impact of internal control quality on credit financing costs,and the differences between different political connections.The policy suggestions are as follows:enterprises should strengthen the construction of internal control system of enterprises,standardize the information disclosure of internal control of enterprises;the supervision departments should accelerate the construction of internal control norms system and promote the internal control legislation;the government should accelerate the marketization of the allocation of credit resources and promote the market reform of the banks.