The Influence Of The Quality Of Internal Control And Its Promotion On The Cost Of Equity Capital

Since January 1,2012,China's listed companies must compulsorily disclose the annual internal control self-assessment report and the internal control audit report independently audited by third parties.Under such a policy background,it is necessary for scholars to conduct in-depth research on whether listed companies can strengthen the construction of internal control and thereby significantly improve the quality of their internal control,thereby reducing their cost of equity capital.At present,few scholars have studied the influence of the internal control quality of listed companies and their impact on the cost of equity capital and the specific impact process in the context of mandatory disclosure.Therefore,this paper studies the influence of the internal control quality of listed companies and their impact on the cost of equity capital since 2012.It also uses the two indicators of financial reporting quality as intermediate variables to study the quality of internal control of listed companies and Raise the path of the specific impact on the cost of equity capital.Based on the background of the changes in the internal control system of Chinese enterprises,this article reviews domestic and foreign scholars' research on the impact of internal control quality on the cost of equity capital,the impact of internal control quality on the quality of financial reporting,and the quality of financial reporting on the cost of equity capital.The literature that affects three aspects of the research,based on the theories of contingency theory,information asymmetry,and signal transmission theory,put forward research hypotheses and selected all A-share listed companies from2012 to 2016 as samples,excluding financial industry and incomplete data.The sample companies studied the impact of internal control quality and its impact on the cost of equity capital and the specific impact path through Rreacher and Hayes' mediating effects model.The study finds that the quality of internal control and financial reporting of listed companies in China are significantly positive at the 1% level,and are significantly positively correlated with the two indicators for measuring the quality of financial reports;the listed companies are measured by the absolute value of accrued earnings management The financial report quality and cost of equity capital aresignificantly negative at the 10% level,but it is positively related to the quality of financial reporting as measured by the level of real earnings management,but not significant;the improvement of the internal control quality of listed companies affects the overall cost of equity capital.Both the impact and the direct impact are significantly negative.Research shows that in the stage of mandatory disclosure of internal controls,the quality of internal control of listed companies can significantly curb the possible existence of accrued earnings management practices and real earnings management practices of its management,thus ensuring the quality of its disclosed financial reports;and the financial reports of listed companies.The improvement of quality can significantly reduce its financing costs in the capital market,that is,its cost of equity capital can be significantly reduced;the improvement of the internal control quality of listed companies can significantly reduce their cost of equity capital,and its conduction path is the internal control environment of listed companies.The optimization led to the improvement of its internal control quality,reduced the level of earnings management of the management,ensured the quality of financial reports,and reduced its cost of equity capital.