Case Analysis of Internal Control in Hainan Airlines (HNA) Group

Jiaxuan Li

doi:10.71204/p7c00k16

Authors

Jiaxuan Li Beijing City University Author

DOI:

https://doi.org/10.71204/p7c00k16

Keywords:

HNA Group, Internal Control Failure, COSO Framework, Diversification Strategy, M&A Risk, Corporate Governance

Abstract

Hainan Airlines (HNA) Group, once a leading enterprise in China’s aviation and tourism industry, fell into a systemic operational and financial crisis and entered bankruptcy reorganization in January 2021, due to severe internal control deficiencies in the process of aggressive M&A-driven diversification. This study takes HNA Group’s internal control failure as a typical case, systematically analyzes the evolution, core defects and root causes of its internal control problems based on the COSO 2013 Internal Control-Integrated Framework. By supplementing detailed textual interpretation of core financial indicators, streamlining causal analysis logic, and linking optimization measures closely to COSO’s five internal control elements, this paper clarifies the two-way vicious cycle between aggressive diversification strategy and internal control system failure. The study also standardizes industry benchmark data sources and time alignment, and further distills empirical findings, managerial implications and normative recommendations from the case. The research contributes to the enrichment of internal control theory in the context of enterprise diversification, and provides practical reference for Chinese enterprises to optimize internal control systems and avoid operational risks in strategic expansion.

References

Chen, S. (2022). Why did the HNA myth collapse? An analysis of corporate internal control issues. China Township Enterprises Accounting, 11, 125–128.

Chen, Y. (2019). Research on financial risks of private enterprises: A case study of HNA Group. Economic Research Guide, 31, 99–102.

China Aviation Transport Association. (2020). China civil aviation enterprise internal control white paper (2020). Beijing, China: China Civil Aviation Press.

China Securities Regulatory Commission. (2021). Administrative penalty decision on HNA Holdings Co., Ltd. (No. [2021] XX). Beijing, China: Author.

Committee of Sponsoring Organizations of the Treadway Commission. (2013). COSO internal control—Integrated framework (2013 update). New York, NY: COSO.

Huang, R., & Qin, D. (2022). Enlightenments of HNA Group’s restructuring on financial management. Finance & Accounting, 4, 25–31.

Jiang, F., & Li, J. (2022). Internal control failure and corporate risk taking: Evidence from Chinese listed companies. China Journal of Accounting Research, 15(2), 89–112.

Li, M., & Zhang, Q. (2021). Diversification strategy and internal control effectiveness: A moderated mediation model. Journal of Management Science in China, 24(5), 67–89.

Qiao, H. (2021). Research on internal control problems and countermeasures of HNA Group. International Business Finance and Accounting, 10, 74–77.

Shen, Z., & Song, X. (2015). Alternative shareholder control, related-party transactions, and tunneling: A case study of HNA Group. Journal of Beijing Technology and Business University (Social Sciences Edition), 30(1), 69–79.

Tan, X., & Chen, B. (2022). Identification and enlightenment of HNA Group’s financial crisis. China-Arab Science and Technology Forum, 1, 98–102.

Tang, Y. (2021). Analysis of HNA incident from the perspective of COSO risk management framework. Enterprise Science and Technology & Development, 1, 236–238.

Wind Information Co., Ltd. (2021). China aviation industry financial index report (2006–2020). Shanghai, China: Wind Press.

Yu, Y., Luo, D., & Lin, S. (2021). Corporate governance failure and enterprise bankruptcy: A case study of HNA Group. Finance and Accounting Monthly, 13, 110–117.

Zhang, X., & Peng, H. (2019). Financial risks and control countermeasures of group companies in development: A case study of HNA Group. Enterprise Reform and Management, 17, 47–48.