Research On The Internal Capital Market Allocation Efficiency Of Chinese Groups

China has gradually integrated into the integration of the world economy, so how to improve the industrial competitiveness of China's enterprises in the global scope, and how to become world-class enterprises out of the country, has become an unavoidable problem of the survival and development of China's enterprises. The enterprise groups established through mergers, acquisitions and other means have become the leading force in the national economy. In the Chinese stock market of recent years, a series of group enterprises established by some controlling shareholders or actual controllers, such as "COFCO group", "Delong group" and "Fuxing group", etc.. These enterprises allocate internal capital between the group companies and the member companies (including listed and unlisted members) and between the member companies through various means, thus they construct an internal capital market. Under this background, the study on the internal capital market allocation efficiency of Chinese groups to enhance the allocation efficiency of the internal capital markets has important practical significance.This paper describes the relative theories of internal capital markets, summarizes the formation and the fundamental characteristics of the Chinese groups, and analyzes the overall operation of the internal capital market of the Chinese groups. Basing on the related theoretical analysis, this paper uses a sample of Chinese groups of the non-financial listed A shares companies in Shanghai and Shenzhen Stock Exchange from 2006 to 2009, to empirically study on the internal capital market allocation efficiency and the factors affecting the formation of fixed capital of Chinese groups.The Empirical results show that, active internal capital markets exists in the Chinese groups; Comparing with the state owned groups, allocation efficiency of internal capital market of the private groups is lower; comparing with the groups controlled by central government, allocation efficiency of internal capital market of the groups controlled by local governments is lower; ownership structure and executive compensation have strong impact on the fixed capital formation of the Chinese groups, but the ownership balance and independent directors weakly effect the fixed capital formation of the Chinese groups.Finally, this paper put forward relevant suggestions for improvement on the allocation efficiency of internal capital market of the Chinese groups from both the internal and external aspect of the Chinese groups.