Disclosure Of Internal Control Weakness In Listed Companies And Its Impact On The Scale Of New Loans

To ensure the reliability of the company’s financial report is a target of internal control. It can reduce the imbalance of information between the investors and operators, and foster the smoothly carrying out of company’s debt financing activity. Internal control weakness can influence the realizing of internal control targets, and finally influence the company’s overall operating capability. Then, if a company disclosed its internal control weakness, their bank loan financing activity would be influenced or not. This paper has focused on the sample of all the companies listed from 2007 to 2013 in Shanghai and Shenzhen, using multiple regression analysis method, dividing the internal control weakness of listed companies into internal control weakness that disclosed by self-evaluation report, and those disclosed by auditing report. Through investigating the relation between internal control weakness and the scale of new loans disclosed by company’s self-evaluation report, and the relation of them disclosed by auditing report, this paper analysis the influence of internal control weakness to bank loaning.According to the research, internal control weakness and the scale of new loans disclosed by company’s self-evaluation report is in negative correlation, but not obviously. While, internal control weakness and the scale of new loans disclosed by company’s auditing report is in obviously correlation. This result shows:On one hand, companies that had and disclosed internal control weakness in an all round way, their scales of new loans will be influenced and shrink. This indicates that the risk management of banks in China is working. On the other hand, the obvious difference between these two kinds of disclosures show that companies’ internal control system is still imperfective, information disclosure is in low level, short of motivation to disclose, and information disclosure quality is not so good. When we choose the sample, we found that the number of both self-evaluation disclosure and auditing disclosure is not enough, especially for the material weakness. This fact shows us the current situation of internal control information disclosure, and made us clearly understand that the internal control building should be further strengthened.Bank loan financing is an important financing way for listed companies. So the question that how to get high loans in low cost is important for listed companies to broaden the production capacity, optimize the capital chain, improve the overall competitiveness. Based on the conclusion of this paper, company’s management can cater to some evaluation criteria that banks may refer to when make decisions through the building of internal control system and the disclosure of major internal control information. This would endow the company some kind of external financing advantages. So, how to raise the disclosure level of company’s internal control is a question that those listed companies who want to get bank loan should carefully think about.