The Relationship Between The Business Relatedness And The Efficiency Of Family Business Group’s ICM

As in an emerging capital market country, Chinese large enterprise groupshave a strong motive to raise funds from the internal capital market (ICM)because of the serious financing restraint of the external capital market(ECM).In recent years many "Family business groups" have emerged whichare seen as the external manifestation of the internal capital market’s functionmechanism. Members of family business groups contact with each otherthrough the complex equity relationships which cause the complex interestrelationships between them.Meanwhile, there are also frequent businesscontact in them. What influence will the close business contact exert to theefficiency of the internal market? It’s really necessary to take an empiricalanalysis about it.First,this article gives a systematic review about the literature of therelation between the business relatedness and the efficiency of the internalmarket. There are two opposite viewpoints in the academic circlecurrently.Then it gives an overview about the theory of Family businessgroups and the business relatedness.Second,following a definition for the existence of the internal market,thisarticle examines the existence of the internal market of Family businessgroups by multiple linear regression which lays the foundation for furtherstudy.Finally,this article establishes a measure system for the businessrelatedness and adopts the cash-sensitivity of investment method to measurethe allocation efficiency of the internal capital market in Family businessgroups.The results of the article show that there is no positive correlationbetween the business relatedness and the efficiency of the internal market.