The Impact Effect Of Internal Capital Market On The External Capital Market

Internal Capital Market (ICM) was first researched by such foreign scholars as A. Alchian and O. E. Williamson. Nowadays, this theory has become one of the most significant theories about the capital allocation within enterprises. Through research, many scholars found ICM was more efficient than external capital market (ECM) in some areas, namely, capital allocation, supervision and encouragement. This paper intends to explore the impact effect of ICM on ECM in the process of capital allocation on the macro level.This paper consists of three parts. The first part mainly introduces the definition of ICM, literature review and the sources and significance of ICM, which lays a solid foundation for further research. The second part is the core of this paper. In this part, the impact effect of ICM is studied from three aspects: the capital market's scale, price and supervision by combining quantitative and qualitative research methods. The third part analyzes the ECM of our country on the macro level first, and then gives suggestions to the future choices of our enterprise groups'development and the supervision of ICM to promote the healthy and fast development of our enterprise groups.