Relationship Between The Related Party Transactions In An Internal Capital Markets And Firm Value

The rise of western diversification strategy and enterprise merger& reorganization, directly led to the generation of internal capital market, which is currently one of the hottest research topics. At the end of 1990s, Chinese scholars also have begun to pay close attention to this problem, and carry out positive discussion. But based on the Chinese special capital market environment, internal capital markets in China appears obviously related party transaction characteristics. Although, whether case studies or empirical research about internal capital market in China today, mostly involve the contents of related party transaction, there is no scholar directly analyze the relationship between the two research contents, and make both of their conclusions ambiguous. Therefore,it's worthy to discuss whether the standpoint domestic scholars hold, that internal capital market in China is opportunism, correlate with related party transaction.Thinking of problems above, this paper firstly distinguish internal capital market from related party transaction, by comparing their researchs at home and abroad, on institution background, contents, carriers, consequence and something else. Secondly, based on their theoretical logic relationship, and thinking of final control shareholders, we divide related party transaction into two parts, related party transaction in internal capital markets and in external capital markets. Finally, using the empirical evidence of the listed companies in China, we test the relationship between related party transaction in internal capital markets and firm value.Our theoretical research shows that: internal capital markets and related party transaction are not a simple contains and contained relationship, nor two independent problems or expression, but have both general and personality: (1) Internal capital markets trading is one of the most important means of internal capital markets operation; (2) All internal capital market trading are related party transaction; (3) Related party transaction in internal capital markets is the intersection of the two theories, not only an important means of internal capital markets operation, but also main part of related party transactions.In addition, our empirical research shows that: generally, related party transaction in Chinese internal capital market, appears to promote firm value. However, this value up function mainly comes from fair related party transaction, especially, internal capital markets'association inflows, non-fair related party transaction and fair internal capital markets'association outflow both reduce firm value. The influence of firm value to related party transaction in internal capital market is stronger than that in external capital markets, private internal capital markets is stronger than state-owned. When the final control shareholders'ratio is more than 40%, with the increase of the shareholding, the promoting function of fair related party transaction in internal capital to firm value will be strengthened. Also,when the listed company in its own internal capital markets'level is less than 3, fair related party transactions in internal capital markets can significantly enhence firm value.