Market reaction to disclosure of internal control deficiencies in separation of duties

As the basis work for the development of capital market, internal control deficiencies and its disclosure has become the focus of the community. Based on Shanghai A-share listed companies´ data in 2009, using the event study method, We find that the separation of duties deficiencies holds the highest proportion of internal control deficiencies, the appearance is complex, the disclosure of internal control deficiencies in separation of duties will have a significant negative market reaction. We suggested regulators should develop the classification standards of internal control deficiencies disclosure as soon as possible, listed companies should attach great importance to monitoring and disclosure of internal control deficiencies.