Internal Control、External Financing Needs And Insufficient Investment

The classic MM theory holds that under the hypothetically well-performing capital market,companies making investment decisions will inevitably be able to raise enough funds for this decision,and external financing and internal financing will be able to substitute for each other,without external financing requirements.The dilemma of lack of investment due to lack of satisfaction.However,in reality,the capital market is not perfect,and the external financing needs that enterprises face will often affect the investment decisions of companies because they are not satisfied.Although China’s reform of the financial system has been advancing,and the financing environment for companies has also been correspondingly improved,China’s credit market is still not perfect,and the company’s external financing needs are still being met in a timely manner.At the same time,as an emerging market country in China,some legal systems are still not perfect.Investors cannot be fully protected.Investors will conduct multi-faceted considerations when investing.Investors and enterprises will inevitably face entrusted agents.Conflicts have made the financing problems faced by Chinese enterprises more serious.The difficulty in meeting external financing needs not only affects the company’s own operating efficiency,but also affects the development of China’s macro economy.As an internal control system that can effectively alleviate information asymmetry and principal-agent conflicts,it has received attention and attention from the Chinese government since 2006.In 2008,China formulated the “Basic Norms for Corporate Internal Control”.In 2010,it released the “Guidance Guidelines for Internal Control of Enterprises”.At present,it has achieved certain results in internal control construction.The purpose is to urge Chinese companies to actively build internal organizations at the institutional level.Control system and norms,and achieved certain results.Based on its own development,enterprises actively formulate internal control systems and use them as an important means to improve the level of governance and protect the interests of investors.In the actual implementation process,can the company actually alleviate the current situation of underinvestment and protect the rights and interests of investors? Therole? This article starts from the MM theory,sums up the related literature and theoretical basis,sums up the economic results of the company to strengthen the internal control and various factors that affect the company’s lack of investment,and then conduct a theoretical analysis,and in Shanghai and Shenzhen A-share listed companies 2007-2016 The sample for the year is a research object,and an empirical study is conducted on the relationship among the internal control quality of the company,external financing needs,and underinvestment.The study found that: The external financing needs are positively related to the lack of corporate investment.That is,the more external financing needs of the company,the more serious the phenomenon of underinvestment.It is found that for enterprises with external financing needs and insufficient investment,the improvement of the quality of internal control can ease the external financing needs and investment shortages.The sensitivity between.In addition,examining different companies in the context of different ownership properties and different levels of marketization,they found that compared to state-owned listed companies,the improvement of the quality of internal control has a more pronounced mitigating effect on the external financing needs and investment in non-state-owned listed companies;In regions with a low level of marketization,the improvement of the quality of internal control has a greater effect on the mitigation between external financing needs and insufficient investment of companies with higher degree of marketization.The conclusion of this paper helps to understand the mechanism of the influence on the micro-enterprises’ behavior and has important implications for the micro-firm governance and macro-policy formulation.