An Analysis On The Internal Capital Market

Financial system plays an important role in the process of a country's economy development. The deposit of the households flows into the enterprises through the financial system, which configures the resources among the enterprises. When referring to the financial system, almost arguments concern the external finance market, such as the financial intermediation. The research on a country's financial system is not complete until going further into the enterprises, because an important part of the procedure of resources configuration occurs in the internal capital market of the enterprise. Especially, when the finance market is incomplete, the internal capital market of the enterprise undertakes some functions to remedy the shortage of the finance market. Hence, this dissertation tries to research the internal capital in-depth.Above all, this dissertation reviews the literature related with the internal capital market. Furthermore, the dissertation will analyze the essential characters and efficiency of the internal capital market in detail, and point out the advantages and disadvantages of the internal capital market. Based on the empirical researches, we conclude that the internal capital market is more efficient when financial system is incomplete. Finally, the dissertation recommends resolving the financing problem of the small & medium enterprises and optimizing the industry structures through recombining the specialized assets.