Internal control quality, equity pledge financing and investment efficiency

Abstract

In the present situation of difficult enterprise-financing, the equity pledge of corporate controlling shareholders is a effective channel for enterprises to relieve financing constraints. Whether an enterprise can formulate a reasonable investment policy to obtain investment income effectively and achieve financial goals, determines whether an enterprise can develop in the long-tern future. The target of this paper is to approach how the investment efficiency of an enterprise will change with the increase in the portion of controlling shareholder equity pledge (CSEQ), and how the internal control system of the enterprise regulates the contact between controlling shareholder equity pledge and investment efficiency. The article found that the controlling shareholder’s equity pledge (CSEQ) affects the enterprise’s inefficient investment behavior, and the controlling shareholder’s equity pledge ratio has a positive interrelationship with the inefficient investment. According to the previous studies, this paper carries out further research, innovatively introduces the internal control quality index, discusses the influence of internal control quality on equity pledge and investment efficiency sensitivity. The result show that the higher internal control quality can restrain the excessive investment behavior of enterprises