Abstract: In the case of imperfect external capital market, capital allocation is a very important problem in the enterprise group. The capital allocation of enterprise groups is a kind of capital transfer activity. Because of the relationship and the relative independence between the members of the group,the motivation and the results of the group's internal capital transfer are very complicated. In this paper based on the view of evolutionary game theory and the basic theory of internal capital markets, an evolutionary game model of Enterprise Groups' incentive behavior is established in internal capital transfers and deductives the strategy selection process in internal capital transfers between Enterprise Group headquarters and Group segment. And through the evolutionary game analysis of Enterprise Group's incentive mechanism in internal capital transfers, an effective governance mechanism is put forward for Enterprise Groups' internal capital transfers. The results show that if the group segment with a strong ability to capital transfers can get more capital transfer income per unit of capital transfer costs,the group headquarters in the formulation of incentive policies, can appropriately increase the proportion of capital gains. In the same time, the group headquarters get more benefits while not affecting the group segment capital transfer behavior. On the contrary, for the smaller group segment, the group headquarters in the formulation of incentive policies can be appropriate to increase the proportion of their income distribution, enhance the incentive, improve the enthusiasm of the group's capital transfer.

Key words: Enterprise Groups, internal capital markets, capital transfers, evolutionary game, governance mechanisms, simulation analysis