Research On The Effectiveness Of Internal Factors And Capital Market Business Groups

The ability to create internal capital market is one of the prominent characteristics of a business group, and internal capital market offers convenience to the business group in terms of capital allocation. It is of great significance to research the capital allocative efficiency in business groups. This paper analyzes the system background of internal capital markets within business groups, and empirical evidence based on Chinese business groups to demonstrate the existence and efficiency of internal capital market in business groups. Furthermore, the paper testifies some factors’influences to internal capital market efficiency, such as different equity characteristic that are purposely held, company control feature, internal capital market operating methods and so on.The dissertation consists of two parts:theoretical framework and empirical analysis. As for the theoretical framework, we summarize ICM, research conclusions of predecessors, and then produce our own research prospective and methods. As for the empirical analysis, it testifies the existence of internal capital markets in business group, and then measures the internal capital market efficiency of different sorts of business group. And this paper constructs the fixed effect panel data model, analyzes the influence of different factors on the internal capital market allocation.Find out:(1) Business group created the active internal capital markets;(2) There are significant differences in the internal capital market allocative efficiency with different nature of business groups;(3) Company control characteristics, operation factors significantly affect the internal capital market allocative efficiency;(4) There are significant difference with internal capital market allocative efficiency before and after the financial crisis.In order to promote the business group internal capital allocative efficiency, we should highlight as follows:(1) Reduce the business group enterprise level, reduce the separation coefficient between cash flow right and control right;(2) Standardize internal capital market working, enhance internal capital market allocative efficiency;(3) Improve the information disclosure system, and build the controlling shareholder monitoring system;(4) Establishing effective CEO incentive mechanism is an important part of corporate governance;(5) Gradually change the too concentrated ownership structure of listed company.