The Executives' Finance Background And Corporate Internal Capital Market

In recent years,with the increasing integration of economic development,enterprise mergers and corporate restructurings around the world have emerged in large numbers.The development of group enterprises and diversified operations have created prerequisites for the development of internal capital markets.With the development and expansion of China's enterprise groups,the internal capital market has become widespread in China's listed companies,and there are a large number of internal capital activities in the process of enterprise group operation.A well-functioning internal capital market is not only an effective means of internal resource allocation,but also a supplement or substitute for external capital market financing.For large diversified group enterprises,an important economic function of the internal capital market is to ease the financing constraints faced by its member enterprises.The theory of internal capital market has been discussed in foreign countries for a long time,and the research results are also abundant.However,by combing through the relevant literature,we find that the research of the internal capital market of our country is mainly based on case analysis and normative research,the empirical research is relatively few,and the foreign literature is not based on the Chinese enterprise group as the research sample.As an emerging market country,China's theoretical research on internal capital markets lags behind its actual development.Therefore,this paper takes the internal capital market as the research object,and starts from the perspective of executive finance background.We have combined the financial background of executives with the internal capital market for the first time to explore the relationship between them.The research conclusions of this paper are conducive to promoting the function of China's internal capital market and enhancing corporate value,and have certain theoretical and practical significance.This paper uses a large sample empirical research method,taking China's A-share listed companies from 2008 to 2017 as a sample,and measures the vitality of the internal capital market from three dimensions,including the size,frequency of transactions,and types of transactions involved.By constructing sub-dimensional indicators and comprehensive indicators,this paper makes a more comprehensive description of the degree of internal capital market activity.In addition,this paper also examines the impact of the senior management financial background on the net inflow of internal capital and the scale of external financing of enterprises.At the same time,this paper introduces the degree of regional financial development,and explores the differential influence of executive financial background on the internal capital market in different regions where the financial development degree is distinct.The research results show that:(1)For companies with a financial background in senior management,the internal capital market is less active than in companies without a financial background.The existence of "financial connections" has a substitute effect on alleviating financing constraints in the internal capital market.(2)Companies with a financial background for senior management generally have less internal net capital inflows and larger external capital market financing scales,which shows that companies with financial executives have made greater use of the financing facilities provided by “financial relationships” and are more dependent on external financing.(3)Where the degree of regional financial development is different,the impact of the financial background of executives on the internal capital market is different.In places with a low degree of regional financial development,Companies have limited financing channels and they rely more on "financial relations",which is a "reputation and guarantee mechanism ",the motivation to obtain financing facilities is even stronger.The financial connections of executives can better leverage external “relationship financing facilities” effect,the substitution effect on the internal capital market to ease financing constraints is more obvious.This paper draws some conclusions through theoretical analysis and empirical tests.From a micro perspective,it explains the purpose of introducing financial executives and the way in which they play their role.From a macro perspective,it has certain reference significance for the good operation and healthy development of China's internal capital market.The specific manifestations are as follows:(1)This article has described the internal capital market and the vitality of the internal capital market in multiple dimensions,which enriches the relevant theories of the internal capital market.(2)Taking Chinese enterprise groups as a sample,combining the financial background characteristics of senior executives with internal capital markets for the first time,broadening the research scope of financial linkages,and providing a new perspective for research on companies' financing difficulties.(3)The rapid development of enterprises can not be separated from the fully competitive market environment.Although "relationship capital" can effectively alleviate financing constraints,the contract established through "relationship" is neither stable nor strong.Therefore,further improving the level of regional financial development,continuously improving the construction of the financial system,and creating a good financing environment for enterprises are the only way to promote the development of enterprises.