Research On The Interest Conflict And Coordination In The Internal Capital Market

At present, in a mature market system or in the emerging market economy, enterprise groups are living in the mainstream forms of business organization and its production which occupies a pivotal position in all economies. At the same time, the internal capital markets are applicated widerly. Members of enterprises present capital transactions between each other leading by the group headquarters and achieve substantial residual collaboration : enhance effective investment; reduce the group's financing costs and improve the internal efficiency of the allocation of capital, and so on. At the same time, various phenomena indicate internal capital market would bring friction and conflict between members enterprises. As if holding large shareholders deprivate the subsidiaries. abusely investing parent corporation's assets, resources competition and internal friction between the member enterprises, which would lead to an increase in treatment costs and reduce the benefits of cooperation. Therefore, the internal capital market is like a "double-edged sword," people used its advantage of the system. have to consider how to coordinate its internal conflict of interest, reduced management costs and expanding relative returns. Thus the question of conflict of interest in the internal capital market should be studied and summed up theoretically.In the past the internal capital market research, often using information economics paradigm to study the efficiency of the allocation of capital. The paper research the internal capital transactions from the conflict of interests between groups and the internal capital market organization costs are very fewer. So this paper's topics is the interest confliction and coordination in internal capital market .In the specific research the paper is followed by presenting problem, analyzing and solve problems, the study's core research includes the following four parts.First of all, the paper reveals the interest conflict root arising from the internal capital market. The study research the internal capital market from the specific financial actions and uses optimal linear programming methods to establish financial and investment allocation models in the internal capital market. As different investment capacity in the members and the various complex transactions motivated exist, each member enterprises's financing and investment from the the internal capital market was not matching. There are financial discrimination against them and it will become a potential source of conflict of interest. Second, this article has further analyzed the consequence of the interest conflicts.Through establisheing the essential parameter and analyzing the net income situation which the mother and child company as well as their payoff, the paper brings the gambling payment matrix and analyzes the many kinds of possible gambling balanced result.The findings discovered that the internal capitail traszation has been disassimilation for other results because of the interest conflicts and bring the entire social the efficiency loss and the fair violation.Third, this article analyzes the influence factors to interest conflicts , in order to seeks the situation. In enterprise group's internal capital market may regard as is a team cooperation behavior and the interest conflicts coordination need internal spontaneous and exterior strength the involvement.Therefore this article analyzes the influence factor which the effective transaction achieved using the executive agreement theory frame. Finally, the paper analyzes the influence of the exterior legal rules and regulations to the internal capital market.Fourth, the paper analyse empirically the internal capital transactions based on the listed companies in China and includes the three areas. Firstly, by analyzing the relation between the internal capital transactions and corporate finance and investment,we put forward an new interpretation to the financing preference behavior in China's listed companies from the perspective of the financial discrimination in the internal capital market. Secondly, we study the impact to the internal capital transactions and find that the shares of listed companies structure will significantly affect the internal capital transactions happened.Finally, we study the different types of internal capital transaction on the value of the company and find that the exchange of assets can seriously damage to the value of listed companies.Finally, this paper presents the interest conflict coordination mechanisms of the internal capital markets. The study firstly the two objective of the coordination of internal capital markets conflicting interests: to improve and reduce the effective interest transactions conflict and abuse.Then we explore interest conflict coordinate various means from the internal corrections mechanism and external checks and balances mechanism .Then we annalyse capital transactions governance of the major groups in the current world. Finally we present the relevant policy recommendations to progress coordination mechanism of the internal capital transactions in China business groups.Through the above analysis, the article conclusion are that the internal capital market will lead to member enterprises of various conflicts of interest because different enterprises operating characteristics and the complex interests motives. Therefore we should coordinate the internal capital market interest conflict acts from the internal balances mechanism and external checks mechanism to reduce interest costs and internal friction and enhance effective cooperation remaining.