| The internal capital market (ICM) provides a new platform for the development of large enterprise groups. On the one hand, if the external capital market is not perfect, ICM can reduce the transaction costs for businesses by expanding financing channels or reducing information search costs. On the other hand, Pyramid ownership structure may weaken internal supervision, which leads the internal capital market becoming a channel for interest transportation. So, the orderly development of ICM is essential for the healthy growth of large enterprise group.Orderly development of ICM is inseparable from the external and internal environment. External environment means political, economic and cultural environment of the country, while internal environment refers to the company regulations. Based on a stable environment, many researchers studied the efficiency of internal capital market, and they all believed the existence of internal capital markets. Meantime, when it comes to efficiency of ICM, in theory, the struggle of "effective" and "invalid" exists, while in practice there is still in exploration and confirmation. However, the financial crisis began in2007break the stable environment of ICM, which provides a new perspective for our study.Shocked by financial crisis, whether it will change the internal capital market objectives? Whether the efficiency of ICM will change? What reaction will bring for enterprise groups? This research will comment around these problems based on the case of Wanxiang Group.This paper consists of five chapters:Chapter I, introduction. Elaborate the background, purpose and meaning of this paper. Meanwhile, explain the contents of this study and the article structure. Then, present innovation of the article based on preceding research.Chapter II,literature review. In order to exploring the blank area of present researches, this paper summarized the results of previous studies by combing both domestic and foreign existing research related to ICM.Chapter Ⅲ, basic theory and the special systematical background in China. Mainly analyze the Transaction Cost Theory, Ownership Theory and Strategy of Diversification. Meanwhile, this chapter explains the institutional background of ICM from the perspective of state, market and the company. At last, describe the limitations of theory and the changes of institutional background in the financial crisis.Chapter IV, a case study. Take Wanxiang group as an example, this part analyzes the background of Wanxiang Group and why this paper chooses the case. Then, the following part studied in detail how the financial crisis impact on Wanxiang Group’s ICM, analyzing the efficiency of its ICM by the improved cash flow sensitivity model.Chapter V, the conclusions and recommendations. Make a conclusions based on the above theoretical foundation and case studies. And also, put forward suggestions for the development of ICM under unstable environment.The paper comes to the conclusion as following:Firstly, shock by financial crisis, mode of ICM operation is not innovation, but the number and amount of internal transactions increased significantly. Secondly, ICM efficiency of the whole group becomes invalid after the crisis, but ICM efficiency of some listed company inside the group is still effective.The main contribution of the thesis is to comparing the operation and efficiency of Wanxiang Group’s ICM before and after the financial crisis. At the same time, provide a new perspective for the study of private enterprise group’s... |
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