Group Internal Capital Market And Efficiency

Since the last century,business groups has become a global prevalent form of economic organization,and most of the company have set up a finance company to conduct an internal capital market funds management.A large number of listed companies in China are controlled by business groups.In the country's capital market there are 176 financial companies approved,and the ratio of listed companies under the business groups reached 70.4 percent until 2013.It has formed a group internal capital markets with capital flows and configuration among members of the group companies,which can ease external financing constraints and improve the efficiency of capital allocation.So discussing the group internal capital market and financial company has great significance for using group internal funds reasonably and efficiently.On the basis of the previous literature,the writer deduces the mechanism of group internal capital market and group financial companies,and selects the Wanxiang Group as a case.It indicates,first,the Wanxiang Group exists an active internal capital market with a variety of capital works.Second,the Wanxiang Group's capital cost of debt is lower than the capital cost of market over the same period,the group internal capital markets significantly reduced the group's cost of funds.But SFHY,the members of the enterprise,is possible being "hollowed out",because it has a higher internal capital cost of debt than the capital cost of market in 2014.Investment-cash flow sensitivity coefficient of four listed companies in the Wanxiang Group shows that the investment of member companies in internal capital markets,not only restricted by its own cash flow,also influenced by other members',so the configuration of internal capital markets is generally effective.Third,after Finance Company Group was established,capital scale of the group has enlarged and the capital cost of WXQC,a member of the enterprise,has declined,it turns out that the financial company plays an important role of group internal capital allocation.In the group internal financial networks,the listed company has a closer relationship with the financial company which is the center of network.It can improve supply-side' trust for demand-side to reduce information asymmetry.The listed company is more likely to be a Capital input side.