Study On The Effectiveness Of The Finance In Internal Capital Market And The Motives Of Finance

In the 1990s,the research of internal capital market became canonical, and developed a number of the research results. This paper has mainly studied two issues: one is the effectiveness of the finance in internal capital market; another is the motives of finance styles that are based on the cash flow changes.Firstly, this paper introduced the theories of ICM and finance. Secondly we went on to discuss the cause of China's internal capital market, the analysis of financing. Finally we chose the data of China's listed companies, empirically tested the effectiveness of finance in China's internal capital market and the motives of finance styles that are based on the cash flow changes.The content and methods in this paper: (1)Regression analysis tested the effectiveness of financing in internal capital market; (2)Paired samples T-test tested the trend of long -term value of companies that have financed in internal capital market; (3)Regression analysis tested the effect of finance in internal capital market; (4)Regression analysis tested the influence from the corporate ownership structure, the financial situation, profitability and growth. And we tested the reasons of inertial finance and escalation of commitment, and so on.The Empirical Study results of this paper show that: (1)the finance in China's internal capital market negatively correlated with the value of the companies; (2)the long-term value of the companies is U after they have financed in internal capital markets; (3)in the group of cash flow increased, finance in internal capital market significantly correlated with cash flow; (4)escalation of commitment shows notable statistics. Those show that finance in China's internal capital market is disorder; (5)Total assets and price-earning ratio are significant positive correlation with escalation of commitment.Main research work: (1)we do surveys and statistical analysis on finance in China's internal capital markets; (2)how to quantify the variables of finance in internal capital market and cash flow; (3)Financing Behavior is divided into inertial finance, escalation of commitment and so on.At present, China's economy is undergoing a transition period, expanding financing channels is very important significance Therefore the research on the effectiveness of the finance in internal capital market and the motives of finance styles that are based on the cash flow changes has great realistic significance and theoretical value.