Study on Financial Governance Mechanisms of Parent-Subsidiary Relationship in Enterprise Groups

摘要

The logical starting point of financial governance of enterprise groups is the incomplete financial contract and the parent company is the subject of financial governance. Enterprise groups mainly aim to solve agency problems between parent and subsidiary companies and control the agency cost. This paper reveals financial governance mechanisms of parent -subsidiary relat ionship in enterprise groups by constructing a game model. It means that financial governance is an institutional arrangement which should have the function of realizing internalizat ion of external financial activities of subsidiary companies so as to maintain the consistency of overall interests of enterprise groups represented by parent and subsidiary companies.