;This research investigates the difference of investment efficiency between business group and non-business group. Through shaping the role of internal capital markets that business groups play, we point out how the ownership structure and related party transactions affect the investment efficiency. In order to avoid the effect of the split-share structure reform and lockup period that will affect the market price when we measure the investment opportunity, the sample we choose includes listed firms of Shanghai and Shenzhen Stock Exchanges from 2009 to 2013. We find that business groups have better investment efficiency than non-business groups, indicating that business groups in China indeed act as an important internal capital market. From the point of view of ownership structure and related party transactions, we find that state-owned business groups have better investment efficiency than state-owned non-business groups, because state-owned business groups use less related party transactions than state-owned non-business groups.
