The Research On Relationship Financing In Internal Capital Market

Internal capital market(ICM) is a widespread and important mechanism for allocation of resources, who has a far-reaching impact on the operating activities of enterprises, even the whole economy. Therefore, taking an in-depth research on financing in internal capital markets is very necessary and valuable.By linking with internal capital markets and relationship financing together, this thesis takes a deep research on the phenomenon of relationship financing in the internal capital market in enterprise groups. Firstly, based on systematically summing up and collating relevant literatures, the thesis summarizes and analyses the characteristics, advantages and nature of the financing in ICM from the perspective of asymmetric information and transaction cost theory. This thesis holds that the financing in ICM links naturally with relationship financing, who is a close and stable intra-group financing activity characterized by the production of proprietary information and based on long-term interests of both investors and financiers. And it has core elements that relationship financing should have, is a special type of relationship financing. Secondly, from the perspective of social capital theory, the thesis defines the "relationship" in relationship financing in ICM and argues that it is a resources' aggregate established or accumulated in long-term production and operation activities, who can bring about real or potential interests for the enterprise itself. Afterwards, traits of "relationship" are discussed. Thirdly, the thesis analyses dialectically costs and revenues of financing relationship in ICM, and points out that the relationship financing in the ICM produces rental and contractual revenues, but it bring costs of soft-budget constraint and locking-in, that its revenues and costs can be seen as an function of traits of "relationship". The mode of financing is the basis of corporate governance, and has a close logic contact with governance mechanisms. Finally, the thesis discusses governance problems related to the relationship financing in ICM and contingent governance mechanisms corresponding to it.