The Research On Financing Contracts Of Internal Capital Market

This paper has studied internal capital markets from the perspective of contract. Financing is a process of capital transaction. Every kind of transaction is considered as a contractual relationship from the point of economics. Contract is the carrier of a transaction and the tool for capital allocation. It is also a kind of institutional arrangement to regulate the authority, responsibility and benefit relationships among all transaction parts. Therefore, financing contract is a key to study the transaction and capital allocation of internal markets. Essentially, modern corporate governance and financial governance is a kind of contractual governance, so it is helpful to solve the complex agency relationships of the internal capital markets and realize corporate governance by studying the financing contract.In this paper, firstly, contractual attributes of finance has been discussed, and then financing contract has been defined from the perspective of capital market. It shows that financing contract is the tool of financial resource allocation and the contract arrangement of rights relationships among every part which involved in the financing activity. And financing contract is also a kind of contract for the usage rights transaction of financial capital elements.Secondly, the organizational carrier system of internal capital markets has been studied. It is concluded that the organizational carrier of internal capital market is an intermediate organization. Internal capital market is a set of contracts for usage right transaction of financial capital elements under the coordination of authority and price. That is, financing contract.Thirdly, the coordination mechanism of internal capital market transaction and the signing and fulfilling process of internal capital market's financial contract has been analyzed. It is thought that the sign and fulfillment of internal capital market's financing contract is different from market transaction contract because of the effects of authority. It is signed under authorities, which disobeys the fairness and voluntary principles. The fulfillment mainly depends on the third-party supervision.Finally, the major agency problems of internal capital market have been analyzed. And the financial governance function of internal capital market's financing contract has been discussed respectively from different organizational carriers.