Study On Motivation And Performance Of Vertical Integration Of China Coal And Electricity Enterprises

In our country, coal companies and electricity companies play an important rolein China’s economic development. Coal remains above60%，accounting for one-timeenergy consumption. In the power generation process，the power companies use coalfor thermal power,reaching the proportion of coal over70%. Generally speaking, coalcompanies and power companies get close to each other, lying in the upstream anddownstream industry chain. However, since2002, the contradiction of dual structurebetween “power plan” and “market coal” becomes more and more evident. Powercompanies shut down the unit, and the coal companies stop hair coal to the powercompanies often occur, making China’s economic development instable.Based on the above problems, this study will target the vertical integration ofmotivation and performance of the coal companies and power companies, aiming atbringing help to analyze vertical integration of coal companies and power companiessystematically. According to industrial organization theory, transaction cost theory andtechnical efficiency theory, it constructs the analytical framework of inner andexternal forces to analyze the vertical integration of Chinese coal and powerenterprises motivation. Based on analysis of the inherent interest of the pursuit, thisarticle considers that coal companies choose vertical integration can reducetransaction costs, lower production costs through economies of scale and economiesof scope. Based on the analysis of external forces to promote, the article considerscoal enterprise vertical integration driven by the policy environment, marketenvironment and the ecological environment in three areas of external forces. It usesVA/S index to measure the vertical integration index of Chinese listed coal companiesand power companies. It finds that the trend of vertical integration index of Chinesecoal companies and power companies show upward in2005-2012, indicating thedegree of vertical integration in the industry is deepping but obviously there is a bigdifference between different enterprises.It uses fixed effects panel data model for empirical analysis. It thinks verticalintegration can lower transaction costs, enhance market share and improve overallbusiness performance. Above all, it still thinks vertical integration outweigh thedisadvantages. It also empirically test the vertical integration of coal and electricityindustry policy is one of the main drivers of vertical integration of Chinese coalcompanies, and therefore government departments need to provide more policy support to the vertical integration of coal enterprises and power enterprises.I hope this study can make a contribution to the field of vertical integration ofcoal enterprises and electricity enterprises. I sincerely hope that our coal businessthrough effective measures to integrate with each other and through the practical andeffective measures, they can truly improve their core competitiveness and marketposition.