Enterprise Group's Financial Management System To Explore

On Financial Management System of ConglomeratesFocused on the essential characteristics and internal management relations of a conglomerate, this article discusses its vertical and horizontal management relations. The author thinks there are vertical and horizontal financial management relations regarding the financial management of a conglomerate and its financial management system features "vertical decentralization and horizontal centralization of power". On the basis of this theory, the author elaborates on the financial management organizational structure and function divisions. A conglomerate is an economic complex made up of the parent company and its subsidiaries--- the main body and many business and government corporate organizations combined together through ownership and management relationship and contract relationship, which has the following basic characteristics:(1) Members of a conglomerate, instead of itself, are legal entities. A conglomerate is only a complex of legal units.(2) Members of a conglomerate can be bonded via proprietorship and contracts.(3) A conglomerate has a multi-layer structure.(4) A conglomerate has a hierachical structure.According to Theory on Enterprise Nature of Professor Kose, enterprises have substituted the market to some extent. As Doctor Hu Xiongfei points out, an enterprise tends to integrate its related enterprises. However, as the vertical integration and horizontal integration develop into a certain phase, an economical inefficiency occurs when theenterprise tries to maintain the organization integrity, which means the internal organizational cost is higher than trading costs. At this time, the principal member of the conglomerate starts attempting to integrate only some of the enterprises and regard some as external organizations and keep close relations with them through funds, technologies and people. These enterprises remain independent incorporation and keep close relations with the principal enterprise at the same time. Therefore, the enterprises are not only able to reduce trading costs, but to enjoy the economical efficiency resulting from the scale and scope of integration and its function of risk dispersion. Thus an intermediate organizational form between business organizations and market organizations comes into being, which is a Conglomerate, a new type of business organizational form called Semi-Integration Organization.3On the other hand, Doctor Zhang Fuchun, when studying the organizational theory of conglomerates, points out that a combined conglomerate focuses on management of various assets and operation of a profit center. Its most noteworthy feature is its ability to overcome a good many limitations of the traditional capital market, including supervision on administrators. Therefore, a combined conglomerate (in a proper organizational form) is able to allocate resources more effectively as a micro capital market. 4Comprehension of conglomerates is very significant for us to approach financial management and financial management systems in a conglomerate from the point of view of internal management relations. The internal management of a large conglomerate can be simply divided into vertical management relations and horizontal management relations. Vertical management relations refer to the management relations in the group company and between teach individual company based on the theory of modern company management. Horizontal management relations are those at each level, especially at Core, Close and Semi-Close on the basis of proprietorship and contracts. Since such management relations exist, we should take into consideration both vertical and horizontal relations when it comes to the formulation of financial management systems of a conglomerate. Financial Management System is a vital part of group strategies. The financial management system of a conglomerate refers to a basic system to regulate financial authorities, financial obligations division and profit distri...