The Impact of Corporate Governance on the Internal Control Objectives: Evidence from China's Listed Financial Companies

Abstract

This paper selects data from 122 listed financial companies in Shanghai and Shenzhen A-shares from 2011 to 2022, analyzes the impact of corporate governance on internal control objectives, and provides recommendations for optimizing internal control and enhancing company management based on the research findings. The study demonstrates that the "lower proportion of state-owned shares," the "lower degree of Check-and-balance of stock ownership," and the presence of "two-way entry" of party organizations all contribute to the achievement of operational objectives of internal control. Second, the greater the number of professional committees and executives' financial compensation that can aid in achieving the reporting objectives of internal control, the lower the degree of Check-and-balance of stock ownership and the share of executives' equity. Lastly, the higher equity concentration, number of professional committees, financial remuneration for executives, and the existence of "two-way entry" and "cross-appointment" of party organizations can aid in achieving the internal control compliance objective.