Parent Companies And Subsidiaries Of Financial Control

The enterprise group is an economic entity which is constituted of parent and subsidiaries. It comes from and adapts to the new environment of high technical society and market economy. The system of parent-subsidiary corporation has already become the most important organization form of corporate groups. With the constant enlargement of the scale and quantity of corporate groups, how to execute the effective financial control and also don't cause it to have the financial out of control phenomenon becomes one of the focuses of parent-subsidiary corporation management attention key.The financial control of parent-subsidiary corporation can be defined as: under the certain environment, the group board of directors and the group parent company use the certain means of incentive and the restraint way to make the financial resources or the cash pasts of parent-subsidiary corporation to the goal of the group corporate finance value maximization. According to the arrangement of financial control rights between the parent and subsidiary companies, this paper divides the financial control model of parent-subsidiary corporation into three types: the administrative control financial control model (relative centralization), the indirectly control financial control model (relative decentralization) and the composite control model (between centralization and decentralization). These three types of model all have respective characteristic. When the group wants to choose the model, they need to synthesize many factors, such as the group type, development stage of the group development, the parent company's management ability, the important of the subsidiary company to parent company and culture between the parent and subsidiary companies.The financial control of parent-subsidiary corporation needs to depend on the concrete control methods to implement, so the parent companies need to choose the suitable control methods to realize the control, such as budget control, financial personnel controls, the monetary fund control, the financial system control, the financial information control and the audit control. Under different model these methods' effect is various, so we must choose them carefully.