Research On The Economic Effect Of The Mandatory Implementation Of The Internal Control Standard System

The financial fraud cases and bankruptcy incidents of companies at home and abroad all gave us deep and profound lessons:A company must have a good internal control system if it wants to achieve good corporate performance and long-term development.Therefore,how to reduce financial fraud,promote corporate performance,and protect the interests of investors through the establishment of a sound internal control system is a common concern of the government and academia in China.The Chinese government has also issued a series of policies and regulations concerning internal control.The "Basic Norms for Corporate Internal Control" and "Supporting Guidelines for Corporate of Internal Control " constitute China's internal control system.In 2012,the Ministry of Finance issued the “Announcement on the Implementation of the Internal Control Standard System for the Classification and Batching of Main Board Listed Companies in 2012”,which marked the change from a voluntary implementation of the internal control system to a mandatory implementation of listed companies in China.Whether this policy has increased the economic efficiency of listed companies has also become increasingly concerned by the academic and practical communities.This paper uses corporate performance to measure the economic effects of implementing policies and empirically evaluates the effects of the policy.This paper elaborates the theoretical basis for implementing the internal control system to improve company performance.It introduces the difference between the current western policy effect evaluation method and the traditional method,and adopts the Difference-in-Difference method to construct the measurement model of policy effect assessment.On this basis,this paper collected the data of listed companies on the main board of Shanghai and Shenzhen Stock Exchanges from 2008 to 2013,and then studied the policy effect of the mandatory implementation of the internal control system.This paper does not select data after 2014 because the non-state listed companies implemented in the third phase will be the control group before 2014 and will be the experimental group after 2014,which will cause serious errors in the assessment of policy effects.The results of the study show that: First,the mandatory implementation of the internal control system has significantly improved the company's performance and improved the company's performance by 0.818 percentage points.Second,the mandatory implementation of the internal control system can improve corporate performance by reducing internal agency costs anddebt capital costs.The research in this article will help the management of the government and listed companies to better understand the cost-effectiveness of the mandatory implementation of the internal control system,and provide policy guidance for China to further improve the internal control system.