The Relationship Between The Diversified Merger Decision And Internal Capital Market Perspective

In recent years, in order to gradually create large enterprise groups in China,establish a favorable internal capital market for the enterprises, and optimize resource allocation of the enterprises, the State-owned Assets Supervision and Administration Commission actively promotes the acquisition and reorganization of China's enterprises, thereby achieving objectives of international competitiveness enhancement of China's enterprises and promotion of market economy construction of the country based on acquisition and reorganization. Against the backdrop, the study on the relation between the diversified merger and acquisition and the internal capital market of the China's enterprises has some practical significance in improving the efficiency of the diversified merger of the enterprises and optimizing the resource allocation of the internal capital market of the enterprises in China.On the basis of summarization of relevant research results at home and abroad,the paper has done the following researches: firstly, a research hypothesis of the influence on diversified decisions by the internal capital market is put forward before merger and acquisition, a logistic regression model is constructed, and a problem of the influence on the merger and acquisition decision by the internal capital market is discussed; and secondly, relevant research hypotheses are put forward based on further study of the resource allocation efficiency of the internal capital market of the enterprise after merger and acquisition and a regression model of the resource allocation efficiency of the internal capital market is constructed in order to detect the efficiency of the internal capital market directly by observing the cash flow the enterprise's segment and the relation between the investment opportunity and the segment capital expenditure. In terms of data selection of solid evidences, the paper selects marketing enterprises that have made merger and acquisition behaviors and have disclosed segment data in annular reports in detail in Shenzhen and Shanghai from 2009 to 2012 as objects of study and hopes to use the segment data to study the internal capital markets of the China's marketing enterprises directly. The empirical results show that the cash flows and investment opportunities of the core segments of the marketing enterprises influence the uncorrelated diversified merger and acquisition decisions before diversified merger and acquisition. After merger and acquisition, the resource allocation efficiency of the internal capital market is low and a cross-subsidization phenomenon occurs. The capital expenditures of non-core segments with less operating profits and low operation revenue growth rates not onlydepend on the their own cash flows but also depend on the cash flows of the core segments with more operating profits and high operation revenue growth rates.Moreover, the uncorrelated diversified merger and acquisition decisions also have accelerated the development of the cross-subsidization phenomenon of the internal capital market of the enterprises. According to the research conclusion, the paper brings forward some relevant advice on reasonable implementation of the diversified merger and acquisition decisions of the China's marketing enterprises as well as improvement of the resource allocation efficiency of the internal capital markets of the enterprises.