Research On The Financing Alternative Effects Of The Internal Capital Market To The Group M&A

With the wind of M&A more and more strong, diversified enterprise groups are becoming far more common. It is significant to solve the financing problems properly. Under the modern market economy, there are two channels of collecting money usually. One is from the external capital market (ECM), such as stock and credit markets, the other is from its own funds. However, another financing platform exists in enterprise group. It is named internal capital market (ICM), by which the enterprise group can accumulate free cash of its members, and then allocates the resources to excellent investment projects. Therefore, the appearance of the ICM enriches the financing channel of M&A in enterprise group. And it is supplement of the ECM. The whether the ICM of the enterprise group can play a role in its M&A financing is coming to a new research direction.With the methods of normative research and empirical research, this paper summarizes the relative research results domestic and overseas and studies the financing alternative effects of the ICM in enterprise group systematically. Firstly, the author conducts theoretical analysis of financing alternative effects with the theory of ICM Theory, Transaction Costs Theory, Information Asymmetry Theory and Pecking Order Theory. Secondly, the author summarizes the existed papers, finding that the ICM has the function of relieving the financing constraints outside. Thirdly, with the basis of theoretical analysis, the author puts forward three hypothesizes and builds the models creatively. Lastly, the author selects165M&A incidents of enterprise group as study sample, and also selects381M&A incidents of non-enterprise group as contrast sample. Then adopting the methods of descriptive statistics, correlation analysis and MLR (Multiple Linear Regression), the author analyzes the three hypothesizes.The research results indicate that, the ICM of enterprise group can play a role in M&A incidents. And also the effect size has positive correlation with the ICM Efficiency significantly, while has negative correlation with the ICM Scope. And in the last part, the author proposes several recommendations about making the ICM operate efficiently.