An Study On Synergetic Governance Of Internal Capital Market In Business Group

Since the 1990s, Internal capital markets and corporate governance have become two main research subjects of corporate finance. The first subject's research mainly focused on internal capital markets'capital allocation efficiency. But the scholars' opinions do not concur and also are lack of significant convincing conclusions. In fact, the essence of internal capital market inefficiencies was resulted from corporate governance problems. As the representative of the scattered shareholding structure characteristics, which decides the interest conflict between investors and managers is the core problem of corporate governance in the U.S firms, The double agent model of business group's internal capital markets enables the managers have greater space to pursue their private benefits. Similarly, internal capital markets in developing countries have present the negative effects which caused by corporate governance problem is the controlling shareholders'robbing the outside investors'interests. Relying solely on partial and simple analysis type and research method would not solve the problem fundamentally, but also fail into the misunderstanding of seeing the minute details but missing the major issues.Secondly, it is essential to make internal capital markets become a favourable pattern of the business groups making use of various corporate governance mechanism and promote business group to establish a good supervision system, enhance the business groups'governance level eventually.Based on corporate governance and corporate finance, financial economics and enterprise organization theory, synergy theory and game theory's specialized research achievements, This dissertation has conducted the systematic research on internal capital market's synergetic governance questions in the business groups. The key content includes: what the the factors which affect internal capital market governance are; what the internal capital market governance problems under different ownership structure are; empirical study on the internal capital markets governance effect and their financing restraint alleviation effect as well as both interaction effect in the country's business group; analysis of the internal capital markets synergetic governance and evolutionary game between the internal and external governance system; how to evaluate internal capital markets synergetic governance effect,etc.This dissertation applies the corporate governance, corporate finance, evolutionary ecnomics and game theory to make the study on internal capital markets governance of business groups in a creative way, which includes:(1)Internal capital markets governance and business group are placed into a unified analysis framework, the evolutionary paths of synergetic governance to solve the business groups'complex corporate governance issues are constructed from the perspective of evolutionary economics, which provide new thought for improving the overall advantage of business groups in China.(2) Using a large sample, the study confirmes the internal capital markets play the role of both alleviating member firms'financing constraints and robbing the minority investors in Chinese business group, examines the existence of internal capital market, internal capital market governance effect and financing constraints alleviating effect, which provides empirical evidence for internal capital markets synergetic governance. (3) Utilizing the game theory method, the author also researchs the internal capital markets evolution paths of synergetic governance Systematically, based on value generating mechanism, constructs the internal capital market synergetic governance capability maturity evaluation model (ICMSG - CMM) and the fuzzy quantitative evaluation model of synergy effect ,which provide a comprehensive evaluation system of control and information feedback mechanism for internal capital market synergetic governance.The basic conclusions from the study are:(1) Controlling shareholders may extract the outside investor through the very covert method which based on the separation between cash flow rights and voting rights,the extracting motive depends on the controlling shareholders'shares in the listed subsidiaries and the non-listed subsidiaries'performance and the listed subsidiaries'social responsibility targets,such as employment, social stability and so on.(2) Chinese business group has two reasons to rely on its subsidiaries internal capital market at least because of the imperfect legal regme and the underdeveloped financial system:one is the need of robbing outside investors and another is alleviating its financial constraints.What kind of need is more important depends on the exact of corporate governance environment and financial constraint conditions which the group faces.(3)In the internal and external governance mechanism which related to internal capital market governance, the long-term equilibrium structures of multiple collaborative principal participants'coordination behavior evolution may completely synergetic or not, the evolution paths and the final evolution result are affected by initial state of the both parties in the games. In actual operation of internal capital market synergetic governance,The complementarity of the resources , the suitability of the synergy modes, collaboration intention, and the ability to cooperate are the major factors which affect the net income of the principal participants acquired. These factors decide the relevant bilateral strategy evolution paths in the games. These factors play very important role in synergetic governance behavior's dynamic evolutionary process and have direct influence on the establishment and stability of long-term collaborative relations among the multiple collaborative principal participants.