Research on the Impact and Mechanism of Internal Control of Securities Firms on IPO Firms

This paper first introduces the institutional background of the study. In the context of the transition from the approval system to the registration system in China, the gatekeeper role of IPO enterprises has changed from the supervisor to the market, which puts forward higher requirements for intermediary institutions such as securities companies. As an important market medium connecting IPO enterprises and external investors, securities companies are known as the "gatekeepers" of the capital market. They can authenticate and supervise the IPO enterprises they underwrite and/or sponsor. The impact of securities companies on the IPO process has also been a hot topic in the academic and practical circles. This paper examines the impact of internal control of securities companies on IPO companies.This study finds that the higher the level of internal control of securities companies, the higher the quality of IPO companies, including higher IPO information disclosure quality, lower IPO underpricing and higher post IPO performance. The mechanism test indicates that the internal control of securities companies can reduce employees' self-interest behavior and improving employees' work efficiency. Secondly, the impact is stronger in non-state-owned enterprises, when the reputation of securities companies is lower, and the external legal environment is lower. In addition, this study finds the compliance degree of internal control and the reliability of reporting of securities firms are important dimensions that affect the quality of IPO enterprises. iv The conclusions of this study have some practical significance. First, this study finds that the level of internal control of securities firms has an important impact on the quality of IPO enterprises. Therefore, improving the internal control of China's securities companies is an important work that needs to be grasped for a long time. The research conclusions of this paper have important research significance for further optimizing the gatekeeper responsibilities of securities companies and improving the efficiency of resource allocation in the IPO market under the background of the transition from the approval system to the registration system in China's IPO market.