| Recently, numerous Chinese listed corporations have developed into enterprise groups by controlling subsidiaries. Similar with large enterprise groups, the fund allocation mechanism Internal Capital Market exists in the listed enterprise groups as well. As an important way to forming and developing enterprise groups, M&A has been increasingly active among Chinese corporations. Whether or not and how the M&A activity of an enterprise group affects ICM efficiency is a new field to explore.This paper studies the influence of enterprise group M&A on ICM allocation efficiency via the methods of normative research and empirical research, on base of reviewing relative research results domestic and overseas. First, existing literature relevant with ICM efficiency and M&A has been reviewed, revealing that large quantity of researches have been done for M&A and ICM efficiency respectively, yet rarely for the combination of the two or studying ICM via the M&A view; Then, on the base of combing relevant theories such as ICM theory etc., the author analyzes the ICM mechanism and how M&A motivation and progress affects ICM allocation and efficiency systematically; Furthermore, empirical tests have been employed to verify the opinion generated from theoretical analysis, with126listed companies who reveal complete subsection information between2009-2011, among which40have M&A undertaken, to test the hypothesizes via descriptive statistics, correlation analysis and MLR (Multiple Linear Regression).Results of this paper suggest that ICM is a systematical fund allocation mechanism and M&A of enterprise groups has effect on ICM allocation efficiency through enterprise groups and the elements of ICM, but the direction of effect is not a one-way result. Empirical result verifies the point, suggesting that M&A of enterprise groups does have effect on ICM efficiency and further study has shown that the controlling company as the buyer can raise ICM efficiency more greatly than subsidiary as buyer. On the base of the research conclusions, several suggestions about ICM and M&A have been given. |
