The Research On The Financing Constraints Under The Impact Of Internal Capital Market Of Yun Tian Hua Group

In the marketing activity, there are two main channels for companies to obtainthe capital they need: one is external capital markets (ECM): stock market and bondmarket; the other is internal capital market (ICM). Internal capital market is apowerful complement to the external capital market. Internal capital market is wherethe enterprise group have resources integrated and redeployed. Its essence is theinternal market behavior. There is a saying that, in theory internal capital market isinvalid, still compared with ECM, ICM plays a role in reducing informationasymmetry and incentive friction, in reducing the cost of financing and so on.Therefore ICM relieves financing constraints of the member enterprises．Based on results of studies by using internal capital market theory, takingChina’s market environment and institutional background into consideration, thispaper presents a systematic study on the efficiency of internal capital marketallocation of capital. Firstly, this paper had a theory research on the characteristics ofinternal capital markets and the effectiveness of basic issues, and found therelationship between internal capital market efficiency theory and financingconstraints. Then, in the case of Yun Tian hua Group, study analyzed the effects ofthe operation of the internal capital to financing behavior of the listing Corporationunder the group from the aspects of internal capital market theory and operation mode.The results revealed that the capital operation of enterprise groups can enhance thefinancing capacity in short term and ease the financing constraints. However, it alsocauses a rise in the enterprise financial leverage function and financial risk. Finally,on the basis of case study, polices and recommendations were proposed in this paperto improve the internal capital market and the efficiency of capital allocation.