Dissertation > Economic > Economic planning and management > Economic calculation, economic and mathematical methods > Economic and mathematical methods

The Incentive and Consequence of Internal Control Disclosure-The Impact of Agency Problem

Author ZhangZhiZuo
Tutor LiZhiWen
School Zhejiang University
Course Accounting
Keywords internal control voluntary disclosure agency problem cost of capital
CLC F832.51;F224
Type Master's thesis
Year 2012
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Internal control disclosure plays an important role to the efficiency and effectiveness of the capital markets. From the prospective of agency problem, this article examines the incentive of internal control disclosure and the economic effect, pointing out that the conflicts between the control owners and minority shareholders impacted the internal control disclosure decision and the internal control disclosure can further impacted the cost of capital.This article uses the voting right and the differences of the voting right and cash flow right to measure the agency problem. Firstly, we document that firms with agency problems embedded in the ownership structures are more likely to disclose internal control report. This relationship is evident among firms that raised capital in the current or following year. Secondly, using underpricing to measure the cost of capital, this article finds out there are negative relationship between internal control disclosure and the cost of capital. And this relationship exists in the firms with less uncertainty and less manipulation of share price.This is the first article which finds out the impact of agency problems embedded in the ownership structures to the internal control disclosure. According to the conclusion, this article suggests that the disclosure of internal control deficiency should be emphasized. Besides, due to the different market reaction to the disclosure, this paper find out "say good words" to the public is not enough, and the listed company should also pay attention to their real behavior.

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