Abstract: In the presence of global economic slowdown and China's increasing economy downward pressure, the risk, especially the corporate credit risk is worthy of attention. The corporate credit risk amplification is closely correlated with business managers of over-investment characteristics. How to achieve effective control corporate credit risk has become one of the focus fields of management system. Therefore, in this study, using Chinese firms that issued Type A-shares in the SSE and SZSE from 2009 to 2014, whether over-investment lead to credit risk is examined, and further whether the improvement of internal control can effectively restrains the credit risk caused by over-investment is examined, and then whether the above effect of internal control is influenced by the nature of the firms' ultimately controllers is investigated. It is found that the corporate credit risk can significantly increase due to over-investment. Moreover, improved internal control is conducive to curb the corporate credit risk resulting from the firm's over-investment, but the role of internal control is weaker in private enterprises. These findings indicate that the construction of internal control system of state-owned enterprises has achieved certain results with government promotion, and the internal control of private enterprises need to be stepped up further in order to reduce the risks involved in developing. The main contributions of this paper are as follows:(1)our findings provide new empirical evidence for the stakeholders such as managers and investors to highly emphasis and build the enterprise internal control system construction and enhance controlling credit risk; (2)it also reveals the effect of internal control on credit risk is influenced by property right, which furnishs an elicitation to the reform of the state-owned enterprises and gets up the very good exemplary role for the construction of internal control of private firms, thereby provides a new basis for the Chinese government to promote the construction of internal control.

Key words: internal control, over-investment, corporate credit risk, the agency problem