Internal Control Weaknesses With Its Types And M&A Performance Of Enterprises

M&A decision-making is an important investment measure for Chinese enterprises to integrate market resources and expand business territory.Its success will have a far-reaching impact on the financial situation of enterprises.The construction and improvement of internal control system is related to whether enterprises can fully prevent risks and effectively integrate resources in the development and growth of M&A activities.As the practice of M&A of Chinese enterprises is still in the exploratory stage and not mature enough,they are faced with many risks.In this context,it is of great theoretical and practical significance to study the impact of internal control weaknesses on corporate performance after M&A in China.This paper first reviews the current research status and main achievements in the field of internal control weaknesses and M&A performance in academia,then analyses the relationship between internal control weaknesses and M&A performance,and points out that internal control weaknesses will affect the assessment ability of management in M&A and the internal and external restraint mechanism of the company and the resources management ability in the later stage of M&A,through which to affect the performance of M&A,leading to the difficulty of realizing the expected value of M&A.Next,we divide the types of internal control defects by analyzing their characteristics,which are internal control weaknesses at the company level and internal control weaknesses at the business process level,and analyze which internal control weaknesses will mainly affect the merger and acquisition performance of enterprises.Finally,according to conclusions based on the empirical outcomes,the policy recommendations which can be implemented are put forward.In this paper,when studying the relationship between internal control weaknesses and their types and M&A performance,we use PSM to solve the endogenous problem of internal control weaknesses,and get the matching samples after PSM.On this basis,we use the principle of least square method to construct a linear regression model and analyze the relationship between variables.At the same time,in the stability tests,by replacing dependent variables and adjusting the sample size,regression provides a more stable conclusion for the final study.Empirical results show that internal control weaknesses can significantly reduce the performance of M&A.The negative effects mainly come from internal control weaknesses at the company level,while internal control weaknesses at the business process level have no significant impairment on the performance of M&A.Secondly,under the background of mandatory disclosure,internal control weaknesses have more information content,which can significantly reduce the performance of M&A.The innovations of this paper are as follows:(1)This study will enrich China's research on internal control weaknesses.Based on the framework of M&A,this paper links the impact of internal control weaknesses on internal and external information and M&A performance,and shows that maintaining the effectiveness of internal control has an important impact on the most important economic decision-making of enterprises-M&A.(2)This paper supplements the significance of the promulgation and enforcement of the internal control system.(3)This paper enriches the research on accounting theory of M&A.A large number of literatures show that mergers and acquisitions will impair the value of enterprises,but few studies on the internal causes from the perspective of internal control weaknesses.Internal control environment is an important enterprise characteristic.This control environment will affect the performance of M&A.A detailed study of the impact of internal control weaknesses and their types on the performance of M&A will enrich the research on the influencing factors of M&A performance.