Internal Control and the Value of Listed Firms in China: Based on Agency Theory

With a sample of Chinese A-stock market listed companies during year 2007–2015, this paper researched the effect of internal control on companies' value based on Agency Theory, and further tested the relationship between internal control quality and companies' value considering the attribute of property right of companies. This paper deduces that by improving the quality of companies' information disclosure and building a balance institution of mutual restriction, high quality of internal control can constraint the three kinds of agency problems in companies to reduce agency costs and add companies' value. However, the implement of companies' internal control is forced by the government and leaded by large shareholders and senior executives, which determined that the internal control institution cannot well restrict the large shareholders' and senior executives' agency problems. Since state-owned companies have more serious agency problems, the quality of internal control will be lower and the positive effect of internal control on companies' value will be weaker in them that in non-state-owned companies.