The Research On ICM Efficiency Of Enterprise Groups

With the globalization and diversification of business development, the United States set off a massive wave of mergers and acquisitions, many companies’mergers and acquisitions of other companies formed a number of large enterprise groups in the mid-20th century. These conglomerates can reduce the cost of capital through capital flows and configuration among members around the capital to start the competition among members, the formation of internal capital markets within the Group.Since the reform and opening up, the number of enterprise groups in China continues to increase, in order to meet business development, corporate financing needs of the Group continued to expand, and some external capital market imperfections exist can’t meet the needs of enterprise groups, so that the internal capital market appears inevitable.Enterprise Group internal capital market allocates capital through a variety of ways, to a certain extent, it can compensate for the shortage of external capital market, such as financing constraints, configuration and supervision inadequate incentives. It is significant that research on internal capital market efficiency and better use of the Enterprise Group internal capital market to allocate capital.In this paper, the author analyzes the theory of the efficiency of internal capital market combined with status quo of China’s enterprises internal capital market efficiency. From two perspectives:efficiency measurement and influencing factors, the author analyzes the China FAW Group Corporation’s internal capital market efficiency, and put forward suggestions on the Group’s internal capital market development, which has important practical significance. This paper has seven chapters, the main content of each chapter as follows:The first chapter is an introduction, a general introduction to the background and significance of the article, research ideas and frameworks and research methods. The second chapter is the literature review, including the content and existence of the Group’s internal capital markets, the relationship between the internal capital market and external capital markets and the efficiency of the Group’s internal capital markets.The third chapter is the theoretical analysis of internal capital markets, including related concepts and theoretical basis of the internal capital market.In the fourth chapter, the internal capital market efficiency was studied from the perspectives of measurement methods and influencing factors. From the impact of influencing factors, corporate governance, corporate characteristics and external capital markets will affect the efficiency of the internal capital market. From the measurement method, the scholars studied a variety of methods to measure for the internal capital market efficiency. The author describes in detail in the text the method named profit sensitivity adjustment method which applies to China’s A-share market.The fifth chapter is the status quo analysis of China’s enterprise group internal capital market efficiency. In this chapter, our business groups and corporate internal capital market problems are analyzed, and then the author analyzes the status of its internal capital market efficiency.The sixth chapter is a case study on the China FAW Group Corporation’s internal capital market efficiency. Firstly, the author analyzes the operation method of the China FAW Group Corporation’s internal capital market. Secondly, the China FAW Group Corporation’s internal capital market efficiency is estimated by profit sensitivity adjustment method which applies to China’s A-share market. The data used in the model was chosen from four listed subsidiaries. Thirdly, the influencing factors of the China FAW Group Corporation’s internal capital market efficiency are analyzed.The seventh chapter is the conclusions and inspiration for the theory and case analysis in this paper. By studying the analysis of the previous chapters, the full text of the summarized findings and propose appropriate countermeasures based on the above conclusions. In addition, this study points out the limitations and future prospects.The main contribution of this paper is:Firstly, the author analyzes the enterprise group’s internal capital market efficiency from and measurement methods and influencing factors. To a certain extent, the paper improves the efficiency of internal capital market theories. Secondly, the paper has the depth case study on the China FAW Group Corporation’s internal capital market efficiency, which is good for improving the China FAW Group Corporation’s internal capital market efficiency. Thirdly, the paper analyzes the status quo of China’s internal capital market business groups, and proposes to improve the efficiency of the internal capital market recommendations, including improving their internal governance structure, the construction of a sound system of internal financial conglomerates and the coordination of external capital market development.At the same time, because of my limited knowledge and time, there are some shortcomings for improvement in the research process. Firstly, the analysis of the enterprise group’s internal capital market efficiency is not comprehensive. Secondly, the author selects a single case study, there is no multi-case and empirical research, which is not entirely representative of enterprise group’s internal capital market efficiency. Thirdly, the case data come from the four listed subsidiaries’ public information, resulting in efficiency estimated and the actual results have a deviation.