Study Of Internal Capital Market And External Financial Constraints Of Chinese Enterprise Group

In the modern market-oriented economy, there are two main channels for companies to obtain the capital they need: one is external capital markets: stock market and credit market; the other is internal capital market. The external capital market in our country has being developing for over 20 years, but still haven't achieve a developed level. Therefore, the arise of ICM is a complement to ECM in a sense. Financial constraint is a common problem that all the companies are facing. In China, as the continuous expansion of business scale and the rapid increase of the Enterprise Group and the family enterprises, the development of ICM have been paid more and more attention because of its superiorities such as the function of releasing financial constraints and so on. But there also some catabolic functions emerge, such as"socialization"and"tunneling effect". So, whether the function is positive or negative in enterprise group in China and how to play the positive role of internal capital markets are not only realistic choices, but questions to be studied and given a clear answer theoretically.In this paper, it's on the basis of the results of recent studies reviewed and mainly use the theory of internal capital market, with the research methods of theory related with practice, drawing on international experience, combined with China's market environment and institutional background, this paper has a more systematic study on the the efficiency of internal capital market allocation of capital. Firstly, this paper has a theory research on the characteristics of internal capital markets and the effectiveness of basic issues, and it finds that the role of internal capital market has positive and also negative effects. Then, on the basis of combining the Zhongliang Group case, it has an empirical study on the efficiency of capital allocation of the internal capital markets, to determine efficiency of capital allocation of internal capital markets raises more objective empirical evidence. Finally, it proposes polices and recommendations to improve the internal capital market and the efficiency of capital allocation. After the study, we find that the internal capital market is a "double-edged sword", that it may have both positive and negative effect. It must establish effective institution arrangements which including the Board of Directors system, supervisory system, the internal control system and the financial management system, the use of capital appraisal system and so on, if it wants to play an active role in the internal capital market.