Research on the allocative efficiency of the internal capital market and connected transactions

Abstract

According to the principal-agent theory, the asymmetric information theory and the internal capital market theory, this paper establishes a theoretical analysis framework, and then analyzes the theoretical relations and differences between connected transactions and the internal capital market. Based on the related theoretical analysis, this paper uses a sample of actual controllers in Chinese groups of the A-share non-financial listed companies in Shanghai and Shenzhen Stock Exchange from 2011 to 2014, to empirically study on the allocative efficiency of the internal capital market and connected transactions. The results show that, connected transactions and the internal capital market have very close theoretical relationship; connected guarantee transactions and connected lease transactions reduce the internal capital market's allocative efficiency, but connected sales transactions and connected capital transactions not affect. This paper innovatively inspects how four types of connected transactions influence the internal capital market's allocative efficiency, which provides a new research perspective and vital analysis foundation.