The Effect Of Company Management To The Internal Capital Market Efifciency In China’s Lisetd Company

ICM, short for internal capital markets, were springing up in last century, whichfirst appeared in the M-firms in the US. When70s in last century, scholars begun topay attention to the research of ICM. There are two outstanding advantages for theICM to configure limited capital in a optimally way, financing and information.China is in a transition from old economic system to an all new economic system.The turn of the economic system causing imperfect relevant laws, that led to theimperfect external capital markets. Due to the high information cost and transactingfee, the firms are difficult to get enough capital in the external capital market, so firmsturn their sight to the ICM. The efficiency of the ICM can be evaluated by the totalvalue of enterprise, which is determined by corporate governance. So the corporategovernance is impact on the efficiency of ICM.This paper is trying to find out the relationship between corporate governanceand the efficiency of the ICM. The first part of the article is introduction. The secondpart of the article is the analysis of literatures, including the reasons of the effective orineffective of the ICM. The third part of the internal capital market related concepts tosort, analyze the theoretical basis and mechanisms of internal capital markets,corporate governance and the internal capital market efficiency factors combine toreveal the link between the two, and then made the assumption of the article.Empirical articles divided into two parts, namely testing the effectiveness of internalcapital markets and examine the effects of internal capital market efficiency factor.Test the effectiveness of internal capital markets and concluded that China’s privateenterprises effective internal capital market in general, but less efficient, internalcapital market efficiency varies greatly among different enterprises. Factors affectingthe internal capital market test concluded as follows: internal capital market efficiencyand the final separation of ownership and control of the people negatively correlated,internal capital market efficiency and the proportion of independent directors in theboard of directors is positively correlated with the management of the internal capitalmarket efficiency salary negative correlation. In the last part of the article, based onthe analysis of previous studies and the conclusions of this article, a number ofrecommendations to promote the internal capital market efficiency.We can say good functioning of the ICM is good for the corporate itself and theexternal capital markets. The existence of the ICM, not only greatly eased their ownfunds for urgent needs, but also reduce the burden on the external capital market financing. We can say good functioning of the ICM is good for both the macro marketand the ICM itself. So in order for the healthy development of the internal capitalmarket direction indicated by influencing factors of internal capital market efficiencyhas a positive meaning.