Research On The Influence Of Internal Control Defect On Trade Credit Financing

Trade credit is an important means of financing for enterprises,and it is more important in the financial system dominated by credit market in our country.Due to the difficulties of credit main channel financing,enterprises often have to seek alternative financing methods in order to survive and develop,and trade credit is a kind of financing method widely used by enterprises.Since "Sarbanes-Oxley Act(SOX)" was promulgated,internal control has gradually become one of the hot issues in the field of accounting and auditing.In the study of the influence of internal control on trade credit financing,scholars often examine the influence of internal control on trade credit financing directly from the positive and static angle of internal control quality.At present,there is little research on the relationship between the two from the negative and dynamic angle of internal control defect and defect correction,and there is also a lack of investigation and analysis on the impact of different levels and categories of defects on trade credit financing.Taking the data of non-financial listed companies in Shanghai and Shenzhen A shares from 2012 to 2017 as a sample,this paper analyzes the influence of internal control defects on trade credit financing.First of all,it discusses whether the internal control defect will affect the trade credit financing of enterprises from the two angles of defect existence and defect correction.Then further analysis of different levels,different types of defects on trade credit financing whether there are differences in the degree of impact.After a series of empirical tests and analyses,this paper draws the following conclusions:(1)there are defects in internal control,which will lead to the goal of internal control can not be achieved effectively,and aggravate the information asymmetry between suppliers and enterprises.It increases the transaction cost and uncertainty of trade credit contracts.In order to protect their own interests,suppliers will choose to reduce the supply of trade credit to enterprises,and the trade credit financing obtained by enterprises will be reduced to some extent.(2)Internal control defects can be corrected so that internal control objectives can be reachieved,information asymmetry between enterprises and suppliers can be improved,contract transaction costs and uncertainties can be reduced,and positive signals will be sent to suppliers at the same time.It helps to increase supplier confidence and enable enterprises to gain access to more trade credit financing.(3)the influence of different levels of internal control defects on trade credit financing is different.General defects,important defects and major defects will have a negative impact on trade credit financing.The major defect has the greatest influence,the important defect is the second,the general defect is the least,and the important defect and the major defect have significant negative influence,but the general defect is not significant.(4)the influence of different types of internal control defects on trade credit financing is different.Suppliers are most concerned about the internal control defects related to financial reporting.The defects in financial reporting control will significantly reduce the supply of trade credit from suppliers to enterprises.Although the defects of non-financial report internal control will also negatively affect business credit financing,it is not significant.The main contributions of this paper are as follows: first,this paper demonstrates the relationship between internal control and trade credit financing from the perspective of internal control defects and corrections,enriches the research perspective,and at the same time faces strong financing constraints in the credit market.It has certain guiding significance to the enterprises which depend strongly on trade credit financing.Second,it further demonstrates the relationship between different levels,different types of defects and trade credit financing,and the depth of research has been improved,which has certain reference value for promoting enterprises to improve their internal control consciously.The limitations of this paper may be as follows: first,in the study of the impact of internal control defects of different severity on trade credit financing,due to the deficiency of variable measurement,there may be some defects in the study of the impact of internal control defects on trade credit financing.Second,the basic data of the internal control in this paper comes from the internal control self-evaluation report of the enterprise.However,the relevant information of the self-assessment report depends on the subjective opinion of the board of directors to a certain extent,which may affect the objectivity of the analysis conclusion.Based on this,further in-depth study and research will be made in the future study and work.