Diversified Conglomerates, Internal Capital Market Efficiency And The Size Of External Financing

As the technology development and updating equipment, Enterprises need a lot of funds. Because of asymmetric information and agency problems, the external capital market can not meet the financing needs of enterprises. The majority of enterprises through diversified group management building internal capital market, headquarters have the advantage of the price and dual to re-configure the internal capital, to meet the financial needs of the project profitable, create more value. Moreover, due to efficient allocation of internal resources, diversified enterprise group to attract more investors to invest and improve the external financing capacity. Therefore, the internal capital market could ease external financing constraints: First, as the Group owns the remaining control, the headquarters can use internal resources to ease the plight of external financing; second, through scale advantages to enhance the ability of external financing.In this paper, Enterprise Group Theory, the internal capital market theory and the financing constraints based on the use of theoretical reasoning and empirical research methods. The advantages of internal capital markets as a starting, this paper analyzes the interaction between internal and external capital markets. Finally, with a sample of H Share Companies, Thesis takes an empirical test on the relationship of the internal capital market and external financing. Enterprise through diversification, aimed at expanding our business. Use diversification to the internal capital market, through the effective allocation of capital, both companies can provide resources for the rapid expansion, but also to take advantage of scale advantages and financial strengths to enhance the external financing capacity. empirical results obtained show that: (1) The diversity of the listed company and the size of external financing can be expanded; (2) The resource allocation efficiency of the internal capital markets of the listed company and the external financing of significant is positive correlation; (3) In the condition of the efficient allocation of resources of internal capital markets, the degree of the diversification and the size of external financing of listed company is positive correlation.Internal capital market theory and empirical research on China's economic reform and development has important practical significance. Diversified companies can spread risks and enhance comprehensive performance. Therefore, enterprises can build internal capital markets internal to Configured internal and external resources. Internal capital market is an alternative to external capital markets, and complement can effectively compensate for the external capital market imperfections, to ease pressure on corporate finance. China's small and medium enterprises should make use of mergers, acquisitions, alliances, etc. combine to fully share the operating and capital resources, not only ease the pressure of external financing, but also can improve investment efficiency and promote economic development.