The Impact Of Financial Crisis On The Operation Of Internal Capital Market In Enterprise Group

With the development of the Internal Capital Market(ICM), there is common ICMin association of enterprises. State-owned firms are the important ingredient of ourcountry national economy, there also appear a train of association of enterprises, forinstance, China North Industries Group Corporation and China Aerospace Science andTechnology Corporation. The operation of ICM can’t be seperated from the outsideenvironment. Under constant state economy environment, the top management of theenterprises is able to relieve the financing restrains through the ICM, but often arouse"Cross Subsidization " phenomenon. Then, under the financial crisis, what adjustmentand change will happen in ICM? Does the association of firms can protect the worsemembers as before? Does it may take effect measures, for instance, enterprise merger,buying and re-organizing and so on to improve allocation efficiency of ICM?First,this paper defines the relevant concepts,and introduces the relevantresearches and Transaction Cost Theory, Information Asymmetry Theory and AgentTheory. Secend, it analyzes the condition of ICM, and raises the assumptions.On thebasis of the above analysis, we select the financial crisis of2008as the background andselect3852state-owned Listing Corporation as the research sample, construct twomodels of ICM to conduct an empirical study. The regression results show thatcompared with the unstate-owned family firms, state-owned family firms can relievethe financing restrains of a member by structuring Internal Capital Market, andallocation efficiency of state-owned family firms’ Internal Capital Market hasimproved under the financial crisis. Finally, this paper gives some advices on the path toimprove the allocation efficiency of ICM in our country.