Operating Leasing, Financing Risk And Internal Control

Bankruptcy cases caused by financing risk frequently appear in all over the world annually, many well-known companies are deep in crisis at the same time, causing a huge negative impact to the development of national economy. Nanjing Tanker Corporation which were delisted on June 5, 2014, for example, confirmed financing lease as operating lease and recorded it in off-balance sheet(“OBS”), as a result, it formed a huge OBS liabilities.Such amount of debt that cannot be relaid, as well as the financing risk that the company cannot control, made company has suffered years of losses for, eventually caused the result of delisting. Under the current norms, the confirmation and disclosure ofoperating lease has the characteristics of OBS financing, it can effectively broaden the financing channels and be favored by more and more listed companies in our country. However, as a typical OBS financing project, operating lease can be huge long-term and concealed, therefore, it is quite particularly important to control the risks of financing and regulate operating lease.As a part of the enterprise management activity, how to regulate operating leases from interior necessarily involves the study of internal governance mechanism. Under the condition of separation of two rightsand information asymmetry, conflicts of interest between management and shareholders, management and creditor are inevitable. Company with effective internal control can creat a good, distribute power and responsibility properly during the economic business decision-making and implementation process, it can make the enterprise more normalized and programmed when facing of the operating lease decisions,utmost ground avoid violations during the process of, thus have certain specification effect on operating leases.For all the above reasons, this paper embarks from the perspective of financing risk, on the basis of the collection literature, summarizes related theories, then discusses normative effect of the internal control on operating leases. Firstly, we review related literature, and make some comments about existing related research. On this basis, we analyze the relation among operating leases, financing risk and the internal control in theory, expounds the relation between operating leases and financing risk, analyze the normative effect of internal control on operating leases, behavior norms, so as to control the financing risk. After put forward the research hypothesis, this article selects A-share listed companies’ dates from 2010 to 2012 for empirical testing. The study find that: during the lease period, companies which have operating leases face a greater risk of financing; on the other hand, after introducing the internal control, financing risk will reduce significantly, it means that as a kind of internal incentive mechanism, internal control plays a positive role in the process of enterprise risk controling, in particular, by standardizing operating leases, effective internal control can reduce the financing risk.