Parent-subsidiary Company Relationship And The Subsidiary Company Growth

Throughout the development history of international economic, a country’s development of economic mainly relies on the development of business groups, as well as the improvement of overall economic quality and the enhancement of international competitiveness. Chinese business group is an economic organization generated with the process of reform and openness, and it is an adaption to the market economy and socialized production. Chinese business group has now become the backbone of national economy and the major force in national competition. Business group companies have advantages that like saving transaction costs and reducing information asymmetry and so on,but their complex multi-level governance system of organization is also a challenge advantages. Establishing a scientific and rational parent-subsidiary company relationship is the premise and foundation to promote the growth rate of each subsidiary, and to ensure the sustainable development of the group’s overall business. Against this background, this paper mainly analyzed the impact mechanism of parent-subsidiary company relationship on the subsidiary company.This paper first reviewed domestic and foreign literatures about the relationship between parent and subsidiary companies, enterprise growth and internal capital markets, and formed a preliminary research idea. Then the paper respectively discussed the impact of parent-subsidiary company relationship on subsidiary company growth from two angle of views, which were parent company’s shareholding percentage to the subsidiary and parent-subsidiary companies’executives association. The paper also analyzed the mediating effect of business group’s internal financial support on the relationship between them. Furtherly, the paper introduced the concept of subsidiary company’s risk propensity to explore its regulatory role between the business group’s internal financial support and subsidiary company growth, and then formed the research model and theoretical assumptions. Finally, the paper selected 575 listed group companies as a sample, and conducted the empirical research to test each hypothesis using 3450 valid data of these companies in six consecutive years.The paper drew the following conclusions through the empirical research:(1) There was a significant positive correlation between parent company’s shareholding percentage (and parent-subsidiary companies’ executives association) and business group’s internal financial support. (2) There was a significant positive correlation between parent company’s shareholding percentage (and parent-subsidiary companies’ executives association) and subsidiary company growth. (3) There was positive impact of internal financial support on subsidiary company growth. (4)Business group’s internal financial support had partial mediating effect between the relationship of business group’s internal financial support (and parent-subsidiary companies’ executives association) and subsidiary company growth. (5) Subsidiary company’s risk propensity had positive role in regulating the relationship between internal financial support and subsidiary company growth.In the end, the paper gave policy recommendations from the aspects of constructing scientific parent-subsidiary relationship and perfecting the group’s internal markets, so as to optimize the management system of group organizations and promote the healthy and rapid development.