Board Characteristics, Internal Control Quality And Corporate Finzancial Performance

At present,investment has become a common economic activity.When judging whether a company has investment value,the company's financial performance is one of the major judgments.Because financial performance is closely related to the development status and operating results of listed companies,it is beneficial for investors to make scientific investment plans.Corporate governance is the main factor affecting financial performance,which is reflected in the contradiction between principal and agency that is widely owned by contemporary companies.The board of directors has always been the focus of corporate governance,and the board characteristics often determine whether the board can function properly.At the same time,the board of directors plays a leading role in the establishment and effective implementation of the internal control system,which indicates that there is also a close relationship between the board of directors and internal control.Internal control plays a major role in preventing risks,information communication and effective supervision.It is also an important part of corporate governance.The emergence of domestic and international financial fraud cases has made the company pay more attention to the improvement of the internal control system,mainly because internal control is directly related to the management of all daily activities of the company,thus profoundly affecting financial performance.By combing the relevant research,this paper believes that the board of directors does not directly affect the financial performance,but first has a certain impact on the company's internal control,and further promotes the growth of financial performance on the basis of improving the quality of the company's internal control.Based on principal-agent theory,stakeholder theory,resource dependence theory and human capital theory,this paper uses the literature research method,normative research method and empirical research method to analyze the role of board characteristics on financial performance by using internal control quality as a mediator,and explore the mediating effects of internal control quality.First of all,in the introduction part,the paper introduces the research background and significance,research ideas and methods,research framework and research innovation points,Then it reviewed and sorted out relevant literatures at home and abroad from the three aspects of board characteristics and corporate financial performance,board characteristics and internal control quality,and internal control quality and corporate financial performance,and found the fields that are still available for research,thus locate the research direction of this paper.Then,this paper defines the related concepts of board characteristics,internal control quality and corporate financial performance,and gives a detailed introduction to the theoretical basis of principal-agent theory,stakeholder theory,resource dependence theory and human capital theory.Through the analysis of these theories,four related research hypotheses are proposed,including 12 sub-hypotheses.Thirdly,based on the proposed four hypotheses,this paper constructs four corresponding multiple regression models,and selects 11948 data from 2012 to 2016 Shanghai-Shenzhen A-share listed companies as research samples,and descriptive statistics,correlation analysis,multiple regression analysis,robustness tests and endogenous test were performed in turn to validate research hypotheses.Finally,the paper draws the following conclusions:(1)Different board characteristics have different effects on the company's financial performance.The duality has a significant negative effect on the financial performance.On the contrary,the shareholding ratio of the board of directors has a significant positive effect on the company's financial performance,the board education level and the overseas background of the board also have a significant positive impact on financial performance.(2)Different board characteristics also have different effects on the quality of internal control.The duality is significantly negatively correlated with the quality of internal control,the shareholding ratio of the board of directors is significantly positively correlated with the quality of internal control,and the board education level and the overseas background of the board are also significantly positively correlated with the quality of internal control.(3)The quality of internal control can effectively promote the improvement of the company's financial performance.That is,the better the quality of internal control,the higher the level of financial performance.(4)The mediating effect of internal control quality.The quality of internal control has a partial mediating effect in the relationship between the four board characteristics with the financial performance: the duality,the shareholding ratio of the board of directors,the board education level and the overseas background of the board.Based on the research conclusion,this paper puts forward relevant suggestions at the end of the paper.Listed companies can strengthen the company's board governance by designing separate leadership structures,implementing equity incentives for board members and strengthening human capital investment in the board of directors.At the same time,companies should also attach importance to the construction of internal control system and give full play to the intermediary effect of internal control quality.The innovation of this paper is: Firstly,the research perspective is relatively new.At present,domestic and foreign scholars have not combined the three variables of board characteristics,internal control quality and company financial performance.For the first time,this paper puts the three into the same research framework,and discusses the mechanism of the influence of board characteristics on the company's financial performance from the perspective of internal control quality;Secondly,the innovation of board characteristic variables.Most existing literatures mainly select characteristic variables of board structure,such as board size,proportion of independent directors,etc.Few literatures measure the board characteristics from the aspects of board education level,overseas background of the board and other background characteristics.Because human capital is the main power to promote economic growth,with the deepening of global internationalization,it plays an increasingly important role in the production and operation of enterprises.The education level and overseas background of the board can accumulate human capital for the board of directors,which is of great economic significance to its function and corporate governance.At the same time,the research on the education level of the board of directors and overseas background can also explain the rationality of the government and enterprises to introduce relevant policies on talent introduction.Therefore,it is necessary to consider these two characteristic variables.Thirdly,it reveals the path of the influence of board characteristics on the company's financial performance.This paper argues that the influence of board characteristics on financial performance is not simply directly related,but may be influenced by some intermediate variables.Therefore,this paper attempts to open the "black box" and take the quality of internal control as the mediating variable to deeply explore the internal path of the influence of board characteristics on corporate financial performance.The results of the study confirmed the mediating role of internal control quality,and also found that board characteristics can not only directly affect financial performance,but also affect financial performance through internal control quality.