A Case Analysis Of Function Dissimilation Of Internal Capital Markets

Internal Capital Market (ICM) is a kind of capital allocation mechanism in the diversified and multidivisional conglomerates or business groups. Because of imperfect corporate governance and severe agency problem of enterprises in China, these will have a negative effect on internal capital market.999 Group's, Delong Group's and Hongyi Group's internal capital market which is defeated by corporate governance and supervision appeared in Chinese securities market. This practice has suddenly appeared internal capital market fundamental research directivity as well as the urgency.It is precisely based on this kind of thought, the paper launches the discussion on the internal capital market theory and the governance question by standardize research methods.Research proves that ICM makes the corporate governance more difficulty, and in the absence of perfect corporate governance mechanism, ICM is easily used as the tools of expropriation by the firm's controller. As for the complex firm structure, ICM originally enhance the efficiency of internal capital allocation, is partially turned into the channel which facilitates the tunneling for controlling shareholder in affiliated transaction and reduces the corporate performance.