Research On The Relationship Between Disclosure Of Internal Control Deficiencies In Listed Companies And Market Reaction

The occurrence of financial scandals in the capital market has led to a growing recognition of the importance of internal control.The United States enacted the Sarbanes-Oxley Act to strengthen regulation of internal control and disclosure in listed companies.In the process of establishing and improving the capital market,China has fully studied the advanced experience of foreign countries,combined with the actual management needs of Chinese enterprises and aiming at the problems of weak internal control and the insufficient disclosure,a series of related institutions were introduced to strengthen the internal control construction and information disclosure in listed companies.The disclosure of internal control information is gradually promoted from voluntary disclosure to mandatory disclosure.This paper firstly sorts out the evolution of China's institution of disclosure of internal control deficiencies and analyzes the status of it.Secondly,based on the institutional background of different listed companies,the paper proposes relevant assumptions and constructs an empirical model.Thirdly,taking the listed companies in 2014-2017 as a sample,the paper compares the relationship between disclosure of internal control deficiencies and market reaction in different markets,and selects typical cases to verify the conclusions.The study finds that the overall level of internal control of listed companies in China is at a low level,and the quality of information disclosure needs to be improved.Although the Internal Control Evaluation Report in the companies of SME board and GEM has a higher disclosure ratio,the internal control level is significantly lower than the companies of Main board.In the context of mandatory disclosure,the disclosure of internal control deficiencies is negatively correlated with market reaction.The existence of uncorrected internal control deficiencies has a strengthening effect on this negative correlation.While in the context of voluntary disclosure,the negative correlation is not significant,the reference value of the Internal Control Evaluation Report is not high.Therefore,the rectification of internal control deficiencies in listed companies needs to be further strengthened.