A Case Study On The Efficiency Of Internal Capital Market In HNA Group

Facing the imperfection of the external capital market,many enterprises use the internal capital market to ease the financing constraints and promote the resource allocation.But there are some phenomenon which the internal capital market is inefficient:cross-subsidization,over-investment,tunneling and so on.So,whether the internal capital market of China enterprise group is efficient or not,the research findings are inconsistent.Therefore,this paper chooses the Hainan Airlines Group（HNA Group）,which is a large-scale diversified private enterprise and has active internal capital market,as the object of the case study on the efficiency of internal capital market.This paper mainly includes five parts:In the first part,the paper briefly introduces the overview,strategy and control mode of HNA Group,and focuses on the construction of a large-scale,diversified internal capital market through the establishment of financial companies,the acquisition of a number of listed companies,diversified operations,global mergers and acquisitions.In the second part,the paper analyzes the operation mechanism,efficiency and influencing factors of the internal capital market in HNA Group.Firstly,the paper analyzes the internal capital market operation mechanism through the related transaction data disclosed by the listed companies listed of HNA Group.It finds that the HNA Group uses internal capital loan,internal assets or equity transfer,internal guarantee,and other ways to carry out a large number of frequent internal capital market operation.Then the paper analyzes the efficiency of internal capital market in HNA Group from two aspects.In alleviating the financing constraints,internal capital market in the HNA Group is efficient,mainly in enhancing the overall external financing capacity,providing internal financing and reducing financing costs,but also enlarges the financial leverage,increases financial risk.In terms of efficiency in optimizing resource allocation,using the cash flow-sensitivity based on ROA(_t-1)method to measure the efficiency of the total internal capital market of HNA Group during2011 to 2015,the result shows that the internal capital market of HNA Group is efficient in capital allocation for the correct strategic,but the efficiency is low.Finally,the paper analyzes the factors that affect the efficiency of the internal capital market of HNA Group.The financial companies with professional competence,the correct strategic positioning and the implementation of the relevant diversification make the internal capital market efficent.Complex ownership and organizational structure is one of the reasons for its low efficiency.In the third part,based on the above case analysis,this paper puts forward some suggestions on the optimization of the internal capital market in HNA Group,including optimizing equity and organizational structure,reducing financial leverage,and also gives some revelation to the internal capital market in the private enterprise group:the good internal capital market can ease the financing constraints,but pay attention to financial risks;the effectiveness of internal capital market can be enhanced by the right strategy,the relevant diversification and professional financial companies;we should comprehensively evaluate the efficiency of internal capital markets by strategic and investment opportunities.In summary,the research of this paper has certain practical significance for the development of internal capital market of HNA Group and other private enterprise groups in China.