Internal Control, Cost of Agency and Investment Efficiency: Theory Analysis and Empirical Evidence

Using samples of A-share listed firms in China, we choose the cost of agency which has an important effect on the investment efficiency as our entry point and systematically study the effect of internal control on investment efficiency as well as the role that agency cost plays in that process. Empirical evidence shows that, high-quality internal control contributes to alleviate corporate existing problems about inefficient investment, and cost of agency can be the mediation between internal control and investment efficiency. Our research results provide our companies with the theoretical basis and reference to perfect internal control system, make effective use of agency cost's mediating effect, and fmally improve the fund utilizing efficiency.