Research On The Internal Network Governance Of The Group’s Internal Capital Market Efficiency

Enterprise groups which are association of a lot of corporations between a singleenterprise and market are a kind of innovative form of business organization.Creating internal capital markets is one of the important functions of the enterprisegroup. The internal capital market of enterprise groups can allocate the resourcesbetween the members of the Group’s under the auspices of the Group’s headquarters.The allocation may not only make a synergistic effect in the area of management,finance, business, culture and other aspects, but also reducing the Group’s financingcosts. However, with dramatic changes in the economic era of China, there are a lotof problems such as unsound defects of economic and financial system as well asdefective laws and regulations. As a result of that, the function of internal capitalmarkets is gradually being alienated, resulting in low efficiency of resource allocationbehavior such as over-investment, cross-subsidization, the controlling shareholderuptake the private benefits of control. Therefore, internal mechanism of the EnterpriseGroup’s internal capital market inefficiencies configuration issues should be in-depthstudied. It is important for us to find the the effective solution to the internal capitalmarket.The inefficient configuration problem in the internal capital market will bepresented in this paper. We raise, analyze, and resolve the organizational carrier, theinherent mechanism and the governance mechanism of inefficient configurationproblem in the internal capital market. Specifically, this paper includes the followingfour parts.Firstly, we discusses the network development trend of the enterprise group, anddraw a conclusion that that the internal capital market is a special networkorganization. In this paper, we define the concept of enterprise groups and analyze thenetwork properties of the Enterprise Group. Then we draw a conclusion that theenterprise groups have the characteristics of hierarchical organization and hierarchical organization because of the intra-group informal relationship.Secondly, we analyze the inherent mechanism of inefficient configuration to theinternal capital market based on the theory of network rent. The behaviors of capitalallocation in the group, which are leaded by the Group’s headquarters, can beanalyzed from two perspectives. At the formative stage of the network rental, becauseof a lack of trust, the members of the Group may reduce the supply of the sharedresources by reducing transaction, hardening and abusing cash flow. At thedistribution stage of the network rental, the alienation behavior between internetsubjects bring the prevention cost and rent-seeking cost, which can decrease themarkets efficiency of the enterprise group’s internal capital market.Thirdly, we creatively put forward the governance mechanism of the internalcapital market efficiency of capital allocation based on the theory of networkgovernance. We should consider of both the lake of trust between the networkmembers and the uneven rent distribution when we design the governance mechanism.The governance mechanism that we designed in this paper is consisted of relationalnetwork governance mechanism and contractual network governance mechanism.Fourthly, we test the effectiveness of the internal capital market networkgovernance mechanisms with the statistical methods of correlation analysis, principalcomponent analysis and multiple regression analysis. The result show that: theinternal capital market network governance mechanisms can improve the efficiencyof internal capital market allocation of a certain extent. And the networkcharacteristic variables of the Enterprise Group have an impact on the internal capitalmarket allocation efficiency.In short, in this paper, we expand the issue of internal capital markets toorganizational carrier, and discussed the internal capital market inefficienciesconfiguration issues based on the theory of network organization, network rentals andnetwork governance. It is an expansion in the scope of theoretical research andpractical application.