Mdern-United Group Internal Capital Markets Function Alienation Research

In recent years, with the European and American countries sovereign debt crisis ceaselessness happens, the international economy will probably appear the second bottom. With economic globalization, the financial crisis will inevitably affect the economic development of our country. Under current circumstances, the profit of some private listed companies is unstable. They are hard to meet the stricter refinancing requirement in stoke market and even have obstacles in options market. So their financing paths are narrowed, and not sufficient to meet the need of companies. Meanwhile, the advantages of internal capital market capture the eyes of companies. But in most cases, the internal capital market is always used to transfer interests due to management structure.This article focuses on the function change of internal capital market. In the companies of china, a relatively mature internal capital market is established. The initial purpose is to alleviate the capital stress, using the idle capital inner the companies to maximize the utility of capitals. But there are disadvantages of the internal capital market. The big shareholder use their authority in the internal capital market to transfer the interest, or even more, this transfers are not based on the right judgment of the market, but gain the capital, which made the small shareholder loss money. This kind of transfer is hidden form public due to the internal capital market nature, so is very severe. How to avoid the transfer is the focus of this article.Internal capital market has advantages compared with the external capital market. The advantages are the information and supervision. These advantages made the internal capital market a good way to alleviate the capital stress. But this can also be a disadvantages since the internal capital market can be a platform for the group to gain the public companies’interests. This article studied the Tianmu Pharmacy case, and found that through internal marketing, procurement, associated guarantees, capital lending and other internal capital market forms, groups obtains funds directly or indirectly from the listed companies in the internal capital markets. What’s more, this part of funds is long-term occupied, which essentially constitutes the Modern Groups on the interests of the Tianmu Pharmacy transfer. The alienation of the Modern Groups internal capital markets function is mainly due to the Group’s non-related diversification strategy, concentrated ownership structure, governance issues of the holding company, lacking of supervisory, the distorted use of the information advantage, and the group may be facing a more financing pressures, etc.Through the analysis of the reasons leads to transfer, the author made five suggestions: import professional shareholder, make institution more mature, standardize the information revelation system, construct independent board member system and alleviate the constraints on private companies.Lack of real model test made this study not very limited and may not look general and persuasive. Besides, the study of the internal capital market should based on the integral levels, but due to the information limit, we focus more on the public companies inside groups, which made the discussions of internal capital market flawed.