The Research On The Financial Coordination Effect Of Internal Capital Market In Enterprise Groups

With the rise of enterprise groups, and the failure of traditional capital market, the internal capital market has become the focus of research within domestic and foreign scholars. Study found that the performance of internal capital market is a kind of diversified investment and internal fund management behavior within enterprises at the micro, and it shows the similar financial functions with external capital markets at the macro. Internal capital market has more advantages than external capital market in that it endows absolute surplus control right to group headquarters, as well as its unique information advantages and incentives, which not only effectively ease the constraints of corporate finance but also greatly improve the efficiency of resource allocation. This paper combines the advantages of internal capital market and proposes that it will produce a more powerful financial coordination effect in internal capital market. Under the current fierce competitive society, enterprise groups can make use of this effect to create more value for themselves.Financial coordination effect's mechanism in internal capital market of enterprise groups can be formulated by save effect and income effect, that is, the appropriate and reasonable coordination can not only save duplicate and non-effective investment costs and the resulting management costs, but also can improve the income level and profitability of enterprise groups. And enterprise groups are also different from a single enterprise, they have a very complex stakeholder relations, the growing conflict of interests have become a threat to stability and development of the whole group, enterprise groups is pressing need for a powerful force to resolve the crisis. Financial coordination effect can effectively solve this problem, it can not only optimize the financial resources, improve the level of financial governance, but also enhance cohesion of enterprise, which is a powerful weapon for harmony and sustainable development of enterprise groups.This paper puts forward that financial coordination effect generates under the premise that all the functions of internal capital market have developed effectively, excluding the widespread functions alienation of internal capital market, but in reality the common existed cross-subsidies and benefits looting, investment risks and financial crises have gradually increased, and the low level of corporate governance has a direct impact on financial coordination effect. So this article concerns that how enterprise groups make use of financial coordination effect to harmonize the complex interests relations and enhance the cohesion of enterprise, improve fund use efficiency and management levels, to promote harmony sustainable development of the group.