Does Internal Control in China State-owned Listed Firms Improve Investment Efficiency?

The main board firms listed on Shanghai and Shenzhen stock markets have been required to implement the Basic Criteria of Enterprise Internal Control since the year of 2012. This paper traces China state-owned listed firms the effects of internal control on investment efficiency from the year of 2012 to 2014. We find that under different circumstances, the internal control material weakness firms have the problem of inefficient investment, however, the under-investment and over-investment problems are alleviated in the second year following the year of material weakness. The above discovery shows that the implementing of the Basic Criteria of Enterprise Internal Control by China state-owned listed firms has its positive effects.