Based on the perspective of the capital market and the dimension of the group, this paper takes the Shenzhen and Shanghai A share listed companies from 2009 to 2018 as a sample to empirically test the contagion effects of major internal control defects in the group. The study shows that: a company’s major internal control defect can result in investor reassessment of other companies in the group and a significant decline in their stock prices; the impact path test shows that industry consistency, internal control quality and the earnings quality of the “infected company” can explain the contagious effect; The heterogeneity test in further research indicates that contagion effects are stronger for companies with “the source of contagion” audited by big ten accounting firms, greater “tunnelling” effect, smaller scale, and operating in more developed areas; The dynamic adjustment inspection of the “infected company” earnings quality finds that, under the supervision of the market, based on the motivation of reputation restoration, the “infected company” can improve the earning quality in a timely manner after the infectious effect occurs, but the rectification in subsequent years is weak. This article not only expands the research on the contagion effects of major internal control defects from the perspective of the market and the enterprise group, but also provides empirical evidence for the importance of internal control for enterprise groups as a whole to prevent internal control risks and the country to promote high quality development.